The Travelers Companies Inc.

02/12/2026 | Press release | Distributed by Public on 02/12/2026 05:52

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

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
CONSOLIDATED OVERVIEW
Consolidated Results of Operations
(for the year ended December 31, in millions except ratio and per share amounts) 2025 2024 2023
Revenues
Premiums $ 43,914 $ 41,941 $ 37,761
Net investment income 3,959 3,590 2,922
Fee income 495 473 433
Net realized investment losses (48) (30) (105)
Other revenues 508 449 353
Total revenues 48,828 46,423 41,364
Claims and expenses
Claims and claim adjustment expenses 27,221 27,059 26,215
Amortization of deferred acquisition costs 7,266 6,973 6,226
General and administrative expenses 6,120 5,819 5,176
Interest expense 425 392 376
Total claims and expenses 41,032 40,243 37,993
Income before income taxes 7,796 6,180 3,371
Income tax expense 1,508 1,181 380
Net income $ 6,288 $ 4,999 $ 2,991
Net income per share
Basic $ 27.83 $ 21.76 $ 12.93
Diluted $ 27.43 $ 21.47 $ 12.79
Combined ratio
Loss and loss adjustment expense ratio 61.4 % 64.0 % 68.9 %
Underwriting expense ratio 28.5 28.5 28.1
Combined ratio 89.9 % 92.5 % 97.0 %
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.
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.
(for the year ended December 31, in millions) 2025 2024 2023
Average investments(1)
$ 104,239 $ 97,012 $ 90,941
Pre-tax net investment income 3,959 3,590 2,922
After-tax net investment income 3,254 $ 2,952 2,436
Average pre-tax yield(2)
3.8 % 3.7 % 3.2 %
Average after-tax yield(2)
3.1 % 3.0 % 2.7 %
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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).
(for the year ended December 31, in millions) 2025 2024 2023
Impairment gains (losses):
Fixed maturities $ (2) $ (5) $ (3)
Real estate investments - (5) (9)
Net realized investment gains (losses) on equity securities still held 50 89 16
Other net realized investment gains (losses), including from sales (96) (109) (109)
Total $ (48) $ (30) $ (105)
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.
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 losses resulting from catastrophic events, such as Property Claim Services (PCS) for events in the United States and Canada.
Catastrophes can be caused by various natural events, including, among others, hurricanes, tornadoes and other windstorms, earthquakes, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions and other naturally-occurring events, such as solar flares. Catastrophes can also be man-made, such as terrorist attacks and other destructive acts, including those involving nuclear, biological, chemical and radiological events, cyber events, explosions and destruction of infrastructure. The effects of catastrophes are included in net income (loss) and core income (loss) and claims and claim adjustment expense reserves upon occurrence. A catastrophe may also result in the payment of reinsurance reinstatement premiums and assessments from various pools and associations.
The Company's threshold for disclosing catastrophes is primarily determined at the reportable segment level. If a threshold for one segment or a combination thereof is reached and the other segments have losses from the same event, losses from the event are identified as catastrophe losses in the segment results and for the consolidated results of the Company. Additionally, an aggregate threshold is applied for International business across all reportable segments. The threshold for 2025 ranged from approximately $20 million to $30 million of losses before reinsurance and taxes.
The following table presents the amount of losses recorded by the Company for significant catastrophes that occurred in 2025, 2024 and 2023, the amount of net unfavorable (favorable) prior year reserve development recognized in 2025 and 2024 for catastrophes that occurred in 2024 and 2023, and the estimate of ultimate losses for those catastrophes at December 31, 2025, 2024 and 2023. For purposes of the table, a significant catastrophe is an event for which the Company estimates its ultimate losses will be $100 million or more after reinsurance and before taxes.
Losses Incurred / Unfavorable (Favorable)
Prior Year Reserve Development for the Year Ended December 31, 		Estimated Ultimate Losses as of
December 31,
(in millions, pre-tax and net of reinsurance) 2025 2024 2023 2025 2024 2023
2023
PCS Serial Number:
25 - Severe wind and hail storms (5) (6) 153 142 147 153
32 - Severe wind and hail storms (6) (5) 140 129 135 140
33 - Severe wind and hail storms (2) (10) 199 187 189 199
35 - Severe wind and hail storms 11 - 140 151 140 140
38 - Severe wind and hail storms 3 3 110 116 113 110
42 - Severe wind and hail storms - 4 133 137 137 133
48 - Severe wind and hail storms 3 (6) 150 147 144 150
49 - Severe wind and hail storms (6) 2 133 129 135 133
51 - Severe wind and hail storms 8 (34) 265 239 231 265
63 - Severe wind and hail storms - 5 125 130 130 125
75 - Severe wind and hail storms (2) (17) 190 171 173 190
2024
PCS Serial Number:
26 - Severe wind and hail storms (10) 261 n/a 251 261 n/a
39 - Severe wind and hail storms (7) 250 n/a 243 250 n/a
42 - Severe wind and hail storms (12) 161 n/a 149 161 n/a
44 - Severe wind and hail storms (1) 171 n/a 170 171 n/a
45 - Severe wind and hail storms 15 159 n/a 174 159 n/a
46 - Severe wind and hail storms 9 182 n/a 191 182 n/a
61 - Severe wind and hail storms (17) 144 n/a 127 144 n/a
77 - Hurricane Helene (68) 733 n/a 665 733 n/a
2025
11 - California wildfire - Palisades fire
1,344 n/a n/a 1,344 n/a n/a
12 - California wildfire - Eaton fire
377 n/a n/a 377 n/a n/a
24 - Severe wind and hail storms 337 n/a n/a 337 n/a n/a
29 - Severe wind and hail storms 137 n/a n/a 137 n/a n/a
37 - Severe wind and hail storms 227 n/a n/a 227 n/a n/a
39 - Severe wind and hail storms 101 n/a n/a 101 n/a n/a
43 - Severe wind and hail storms 97 n/a n/a 97 n/a n/a
45 - Severe wind and hail storms 107 n/a n/a 107 n/a n/a
___________________________________________
n/a: not applicable.
Amortization of Deferred Acquisition Costs
Amortization of deferred acquisition costs in 2025 was $7.27 billion, $293 million or 4% higher than in 2024. The increase in 2025 was generally consistent with the increase in earned premiums. Amortization of deferred acquisition costs is discussed in more detail in the segment discussions that follow.
General and Administrative Expenses
General and administrative expenses in 2025 were $6.12 billion, $301 million or 5% higher than in 2024, primarily reflecting the impact of costs associated with higher business volumes. General and administrative expenses are discussed in more detail in the segment discussions that follow.
Interest Expense
Interest expense in 2025 and 2024 was $425 million and $392 million, respectively.
Income Tax Expense
Income tax expense in 2025 was $1.51 billion, $327 million or 28% higher than in 2024, primarily reflecting the impact of the $1.62 billion increase in income before income taxes in 2025.
The Company's effective tax rate was 19% in both 2025 and 2024. The effective tax rates in both years reflected the impact of tax-exempt investment income on the calculation of the Company's income tax provision.
Combined Ratio
The combined ratio of 89.9% in 2025 was 2.6 points lower than the combined ratio of 92.5% in 2024. The loss and loss adjustment expense ratio of 61.4% in 2025 was 2.6 points lower than the loss and loss adjustment expense ratio of 64.0% in 2024. The underwriting expense ratio of 28.5% in 2025 was comparable with the underwriting expense ratio in 2024.
Catastrophe losses in 2025 and 2024 accounted for 8.4 points and 8.0 points, respectively, of the combined ratio. Net favorable prior year reserve development in 2025 and 2024 provided 2.4 points and 1.7 points of benefit, respectively, to the combined ratio. The combined ratio excluding prior year reserve development and catastrophe losses ("underlying combined ratio") in 2025 was 2.3 points lower than the 2024 ratio on the same basis, primarily reflecting the impacts of (i) the benefit of earned pricing and (ii) lower losses in Personal Insurance.
The combined ratio continues to be impacted by the tort environment, including more aggressive attorney involvement in insurance claims.
Written Premiums
Consolidated gross and net written premiums were as follows:
Gross Written Premiums
(for the year ended December 31, in millions) 2025 2024 2023
Business Insurance $ 25,250 $ 24,515 $ 22,569
Bond & Specialty Insurance 4,647 4,519 4,187
Personal Insurance 17,833 17,516 16,216
Total $ 47,730 $ 46,550 $ 42,972
Net Written Premiums
(for the year ended December 31, in millions) 2025 2024 2023
Business Insurance $ 22,679 $ 22,078 $ 20,430
Bond & Specialty Insurance 4,262 4,109 3,842
Personal Insurance 17,446 17,169 15,929
Total $ 44,387 $ 43,356 $ 40,201
Gross and net written premiums in 2025 increased by 3% and 2%, respectively, over 2024. Factors contributing to the changes in gross and net written premiums in each segment are discussed in more detail in the segment discussions that follow.
RESULTS OF OPERATIONS BY SEGMENT
Business Insurance
Results of Business Insurance were as follows:
(for the year ended December 31, in millions) 2025 2024 2023
Revenues
Earned premiums $ 22,412 $ 21,345 $ 19,144
Net investment income 2,782 2,560 2,085
Fee income 445 430 400
Other revenues 379 322 232
Total revenues 26,018 24,657 21,861
Total claims and expenses 21,432 20,570 18,910
Segment income before income taxes 4,586 4,087 2,951
Income tax expense 891 781 368
Segment income $ 3,695 $ 3,306 $ 2,583
Loss and loss adjustment expense ratio 62.2 % 63.1 % 65.3 %
Underwriting expense ratio 29.5 29.4 29.4
Combined ratio 91.7 % 92.5 % 94.7 %
Overview
Segment income in 2025 was $3.70 billion, $389 million or 12% higher than segment income of $3.31 billion in 2024. The increase in segment income before income taxes primarily reflected the pre-tax impacts of (i) higher net investment income, (ii) higher underlying underwriting margins 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 $233 million and $90 million, respectively. Catastrophe losses in 2025 and 2024 were $1.07 billion and $1.03 billion, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) the benefit of earned pricing and (ii) higher business volumes, partially offset by (iii) higher general and administrative expenses. Income tax expense in 2025 was higher than in 2024, primarily reflecting the impact of the increase in segment income before income taxes.
Revenues
Earned Premiums
Earned premiums in 2025 were $22.41 billion, $1.07 billion or 5% higher than in 2024, primarily reflecting the increase in net written premiums over the preceding twelve months.
Net Investment Income
Net investment income in 2025 was $2.78 billion, $222 million or 9% higher than in 2024. Refer to the "Net Investment Income" section of the "Consolidated Results of Operations" discussion for a description of the factors contributing to the increase in the Company's consolidated net investment income in 2025 compared with 2024. In addition, refer to note 2 of the notes to the consolidated financial statements for a discussion of the Company's net investment income allocation methodology.
Fee Income
National Accounts is the primary source of fee income due to revenue from its large deductible policies and service businesses, which include risk management, claims administration, loss control and risk management information services provided to third parties, as well as policy issuance and claims management services to workers' compensation residual market pools. Fee income in 2025 was $445 million, $15 million or 3% higher than in 2024, primarily reflecting higher claim volume under administration associated with large deductible policies and the service business.
Other Revenues
Other revenues in 2025 were $379 million, $57 million or 18% higher than in 2024, driven by growth in Simply Business. Other revenues also include premium installment charges and other policyholder service charges.
Claims and Expenses
Claims and Claim Adjustment Expenses
Claims and claim adjustment expenses in 2025 were $14.15 billion, $475 million or 3% higher than in 2024, primarily reflecting the impacts of (i) loss cost trends and (ii) higher catastrophe losses, partially offset by (iii) higher net favorable prior year reserve development.
Factors contributing to net prior year reserve development are discussed in more detail in note 8 of the notes to the consolidated financial statements.
Amortization of Deferred Acquisition Costs
Amortization of deferred acquisition costs in 2025 was $3.80 billion, $208 million or 6% higher than in 2024, generally consistent with the increase in earned premiums.
General and Administrative Expenses
General and administrative expenses in 2025 were $3.48 billion, $179 million or 5% higher than in 2024. The increase in 2025 was primarily in support of business growth.
Income Tax Expense
Income tax expense in 2025 was $891 million, $110 million or 14% higher than in 2024, primarily reflecting the impact of the $499 million increase in segment income before income taxes in 2025.
Combined Ratio
The combined ratio of 91.7% in 2025 was 0.8 points lower than the combined ratio of 92.5% in 2024. The loss and loss adjustment expense ratio of 62.2% in 2025 was 0.9 points lower than the loss and loss adjustment expense ratio of 63.1% in 2024. The underwriting expense ratio of 29.5% in 2025 was 0.1 points higher than the underwriting expense ratio of 29.4% in 2024.
Catastrophe losses in both 2025 and 2024 accounted for 4.8 points of the combined ratio. Net favorable prior year reserve development in 2025 and 2024 provided 1.1 points and 0.4 points of benefit, respectively, to the combined ratio. The underlying combined ratio in 2025 was 0.1 points lower than the 2024 ratio on the same basis.
Written Premiums
Business Insurance's gross and net written premiums by market were as follows:
Gross Written Premiums
(for the year ended December 31, in millions) 2025 2024 2023
Domestic:
Select Accounts $ 3,910 $ 3,768 $ 3,502
Middle Market 13,719 12,971 11,800
National Accounts 1,777 1,786 1,665
National Property and Other 3,699 3,828 3,630
Total Domestic 23,105 22,353 20,597
International 2,145 2,162 1,972
Total Business Insurance $ 25,250 $ 24,515 $ 22,569
Net Written Premiums
(for the year ended December 31, in millions) 2025 2024 2023
Domestic:
Select Accounts $ 3,830 $ 3,727 $ 3,477
Middle Market 12,541 12,023 11,045
National Accounts 1,262 1,259 1,135
National Property and Other 3,112 3,134 3,008
Total Domestic 20,745 20,143 18,665
International 1,934 1,935 1,765
Total Business Insurance $ 22,679 $ 22,078 $ 20,430
Gross and net written premiums in 2025 both increased by 3% over 2024.
Select Accounts. Net written premiums of $3.83 billion in 2025 increased by 3% over 2024. Retention rates remained strong in 2025 but decreased from 2024. Renewal premium changes in 2025 remained positive but were slightly lower than in 2024. New business premiums in 2025 increased over 2024.
Middle Market. Net written premiums of $12.54 billion in 2025 increased by 4% over 2024. Retention rates remained strong in 2025 and were comparable with 2024. Renewal premium changes in 2025 remained positive but were lower than in 2024. New business premiums in 2025 increased over 2024.
National Accounts. Net written premiums of $1.26 billion in 2025 increased slightly over 2024. Retention rates remained strong in 2025 and were comparable with 2024. Renewal premium changes in 2025 remained positive but were lower than in 2024. New business premiums in 2025 decreased from 2024.
National Property and Other. Net written premiums of $3.11 billion in 2025 decreased by 1% from 2024. Retention rates remained strong in 2025 and increased over 2024. Renewal premium changes in 2025 remained positive but were lower than in 2024. New business premiums in 2025 decreased from 2024.
International.Net written premiums of $1.93 billion in 2025 were comparable with 2024.
Bond & Specialty Insurance
Results of Bond & Specialty Insurance were as follows:
(for the year ended December 31, in millions) 2025 2024 2023
Revenues
Earned premiums $ 4,107 $ 3,958 $ 3,655
Net investment income 445 390 328
Other revenues 27 30 25
Total revenues 4,579 4,378 4,008
Total claims and expenses 3,385 3,362 2,839
Segment income before income taxes 1,194 1,016 1,169
Income tax expense 244 201 227
Segment income $ 950 $ 815 $ 942
Loss and loss adjustment expense ratio 42.6 % 44.4 % 40.1 %
Underwriting expense ratio 39.3 39.9 36.8
Combined ratio 81.9 % 84.3 % 76.9 %
Overview
Segment income in 2025 was $950 million, $135 million or 17% higher than segment income of $815 million in 2024. The increase in segment income before income taxes primarily reflected the pre-tax impacts of (i) higher net favorable prior year reserve development, (ii) higher net investment income, (iii) lower catastrophe losses and (iv) higher underlying underwriting margins. Net favorable prior year reserve development in 2025 and 2024 was $221 million and $129 million, respectively. Catastrophe losses in 2025 and 2024 were $25 million and $51 million, respectively. The higher underlying underwriting margins primarily reflected (i) higher business volumes, partially offset by (ii) the impact of earned pricing and (iii) higher general and administrative expenses. Income tax expense in 2025 was higher than in 2024, primarily reflecting the impact of the increase in segment income before income taxes.
Revenues
Earned Premiums
Earned premiums in 2025 were $4.11 billion, $149 million or 4% higher than in 2024, primarily reflecting an increase in net written premiums, including the impact of longer duration surety bonds and multi-year management liability policies.
Net Investment Income
Net investment income in 2025 was $445 million, $55 million or 14% higher than in 2024. Included in Bond & Specialty Insurance are certain legal entities whose invested assets and related net investment income are reported exclusively in this segment and not allocated among all business segments. Refer to the "Net Investment Income" section of the "Consolidated Results of Operations" discussion for a description of the factors contributing to the increase in the Company's consolidated net investment income in 2025 as compared with 2024. In addition, refer to note 2 of the notes to the consolidated financial statements for a discussion of the Company's net investment income allocation methodology.
Claims and Expenses
Claims and Claim Adjustment Expenses
Claims and claim adjustment expenses in 2025 were $1.76 billion, $10 million or 1% lower than in 2024, primarily reflecting the impacts of (i) higher net favorable prior year reserve development and (ii) lower catastrophe losses, partially offset by (iii) higher business volumes and (iv) loss cost trends.
Factors contributing to net prior year reserve development are discussed in more detail in note 8 of the notes to the consolidated financial statements.
Amortization of Deferred Acquisition Costs
Amortization of deferred acquisition costs in 2025 was $778 million, $22 million or 3% higher than in 2024, generally consistent with the increase in earned premiums.
General and Administrative Expenses
General and administrative expenses in 2025 were $843 million, $11 million or 1% higher than in 2024.
Income Tax Expense
Income tax expense in 2025 was $244 million, $43 million or 21% higher than in 2024, primarily reflecting the impact of the $178 million increase in segment income before income taxes in 2025.
Combined Ratio
The combined ratio of 81.9% in 2025 was 2.4 points lower than the combined ratio of 84.3% in 2024. The loss and loss adjustment expense ratio of 42.6% in 2025 was 1.8 points lower than the loss and loss adjustment expense ratio of 44.4% in 2024. The underwriting expense ratio of 39.3% in 2025 was 0.6 points lower than the underwriting expense ratio of 39.9% in 2024.
Net favorable prior year reserve development in 2025 and 2024 provided 5.4 points and 3.3 points of benefit, respectively, to the combined ratio. Catastrophe losses in 2025 and 2024 accounted for 0.7 points and 1.3 points, respectively, of the combined ratio. The underlying combined ratio in 2025 was 0.3 points higher than the 2024 ratio on the same basis, primarily reflecting the impact of earned pricing.
Written Premiums
Bond & Specialty Insurance's gross and net written premiums were as follows:
Gross Written Premiums
(for the year ended December 31, in millions) 2025 2024 2023
Domestic:
Management Liability $ 2,588 $ 2,599 $ 2,391
Surety 1,443 1,387 1,219
Total Domestic 4,031 3,986 3,610
International 616 533 577
Total Bond & Specialty Insurance $ 4,647 $ 4,519 $ 4,187
Net Written Premiums
(for the year ended December 31, in millions) 2025 2024 2023
Domestic:
Management Liability $ 2,326 $ 2,309 $ 2,156
Surety 1,354 1,294 1,147
Total Domestic 3,680 3,603 3,303
International 582 506 539
Total Bond & Specialty Insurance $ 4,262 $ 4,109 $ 3,842
Gross written premiums and net written premiums in 2025 increased by 3% and 4%, respectively, over 2024.
Domestic. Net written premiums of $3.68 billion in 2025 increased by 2% over 2024. Excluding the surety line of business, for which the following are not relevant measures, retention rates remained strong in 2025 but decreased from 2024. Renewal premium changes in 2025 remained positive and were higher than in 2024. New business premiums in 2025 decreased from 2024.
International.Net written premiums of $582 million in 2025 increased by 15% over 2024, driven by increases in the United Kingdom and broader Europe.
Personal Insurance
Results of Personal Insurance were as follows:
(for the year ended December 31, in millions) 2025 2024 2023
Revenues
Earned premiums $ 17,395 $ 16,638 $ 14,962
Net investment income 732 640 509
Fee income 50 43 33
Other revenues 102 97 96
Total revenues 18,279 17,418 15,600
Total claims and expenses 15,741 15,875 15,831
Segment income (loss) before income taxes 2,538 1,543 (231)
Income tax expense (benefit) 485 294 (103)
Segment income (loss) $ 2,053 $ 1,249 $ (128)
Loss and loss adjustment expense ratio 65.0 % 69.7 % 80.4 %
Underwriting expense ratio 24.5 24.7 24.4
Combined ratio 89.5 % 94.4 % 104.8 %
Overview
Segment income in 2025 was $2.05 billion, $804 million or 64% higher than segment income of $1.25 billion in 2024. The increase in segment income before income taxes was driven by the pre-tax impacts of (i) higher 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 $582 million and $490 million, respectively. Catastrophe losses in 2025 and 2024 were $2.59 billion and $2.25 billion, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) lower losses in the automobile product line, (ii) the benefit of earned pricing, (iii) higher business volumes and (iv) lower non-catastrophe weather-related and non-weather losses in the homeowners and other product line. Income tax expense in 2025 was higher than in 2024, primarily reflecting the impact of the increase in segment income before income taxes.
Revenues
Earned Premiums
Earned premiums in 2025 were $17.40 billion, $757 million or 5% higher than in 2024, primarily reflecting the increase in net written premiums over the preceding twelve months.
Net Investment Income
Net investment income in 2025 was $732 million, $92 million or 14% higher than in 2024. Refer to the "Net Investment Income" section of the "Consolidated Results of Operations" discussion for a description of the factors contributing to the increase in the Company's consolidated net investment income in 2025 as compared with 2024. In addition, refer to note 2 of the notes to the consolidated financial statements for a discussion of the Company's net investment income allocation methodology.
Other Revenues
Other revenues in all years presented primarily consisted of installment premium charges.
Claims and Expenses
Claims and Claim Adjustment Expenses
Claims and claim adjustment expenses in 2025 were $11.30 billion, $303 million or 3% lower than in 2024, primarily reflecting the impacts of (i) lower losses in the automobile product line, (ii) lower non-catastrophe weather-related and non-weather losses in the homeowners and other product line and (iii) higher net favorable prior year reserve development, partially offset by (iv) higher catastrophe losses and (v) loss cost trends.
Factors contributing to net prior year reserve development are discussed in more detail in note 8 of the notes to the consolidated financial statements.
Amortization of Deferred Acquisition Costs
Amortization of deferred acquisition costs in 2025 was $2.69 billion, $63 million or 2% higher than in 2024, generally consistent with the increase in earned premiums.
General and Administrative Expenses
General and administrative expenses in 2025 were $1.75 billion, $106 million or 6% higher than in 2024, primarily reflecting higher contingent commissions.
Income Tax Expense
Income tax expense in 2025 was $485 million, $191 million or 65% higher than in 2024, primarily reflecting the impact of the $995 million increase in segment income before income taxes.
Combined Ratio
The combined ratio of 89.5% in 2025 was 4.9 points lower than the combined ratio of 94.4% in 2024. The loss and loss adjustment expense ratio of 65.0% in 2025 was 4.7 points lower than the loss and loss adjustment expense ratio of 69.7% in 2024. The underwriting expense ratio of 24.5% in 2025 was 0.2 points lower than the underwriting expense ratio of 24.7% in 2024.
Catastrophe losses accounted for 14.9 points and 13.5 points of the combined ratio in 2025 and 2024, respectively. Net favorable prior year reserve development in 2025 and 2024 provided 3.4 points and 3.0 points of benefit, respectively, to the combined ratio. The underlying combined ratio in 2025 was 5.9 points lower than the 2024 ratio on the same basis, primarily reflecting the impacts of (i) lower losses in the automobile product line, (ii) the benefit of earned pricing and (iii) lower non-catastrophe weather-related and non-weather losses in the homeowners and other product line.
Written Premiums
Personal Insurance's gross and net written premiums were as follows:
Gross Written Premiums
(for the year ended December 31, in millions) 2025 2024 2023
Domestic:
Automobile $ 7,772 $ 7,949 $ 7,352
Homeowners and Other 9,383 8,845 8,190
Total Domestic 17,155 16,794 15,542
International 678 722 674
Total Personal Insurance $ 17,833 $ 17,516 $ 16,216
Net Written Premiums
(for the year ended December 31, in millions) 2025 2024 2023
Domestic:
Automobile $ 7,745 $ 7,925 $ 7,330
Homeowners and Other 9,051 8,550 7,949
Total Domestic 16,796 16,475 15,279
International 650 694 650
Total Personal Insurance $ 17,446 $ 17,169 $ 15,929
Gross and net written premiums in 2025 both increased by 2% over 2024.
Domestic
Automobile net written premiums of $7.75 billion in 2025 decreased by 2% from 2024. Retention rates remained strong in 2025 and were comparable with 2024. Renewal premium changes in 2025 remained positive but were lower than in 2024. New business premiums in 2025 increased over 2024.
Homeowners and Other net written premiums of $9.05 billion in 2025 increased by 6% over 2024. Retention rates remained strong in 2025 but decreased from 2024. Renewal premium changes in 2025 remained positive and were higher than in 2024. New business premiums in 2025 decreased from 2024.
For its Domestic business, Personal Insurance had approximately 8.4 million and 8.8 million active policies at December 31, 2025 and 2024, respectively.
International
International net written premiums of $650 million in 2025 decreased by 6% from 2024, driven by decreases in the automobile product line.
For its International business, Personal Insurance had approximately 349,000 and 425,000 active policies at December 31, 2025 and 2024, respectively.
Interest Expense and Other
(for the year ended December 31, in millions) 2025 2024 2023
Income (loss) $ (373) $ (345) $ (325)
The income (loss) for Interest Expense and Other in 2025 and 2024 was $(373) million and $(345) million, respectively. Pre-tax interest expense in 2025 and 2024 was $425 million and $392 million, respectively. After-tax interest expense in 2025 and 2024 was $336 million and $310 million, respectively.
ASBESTOS CLAIMS AND LITIGATION
The Company believes that the property and casualty insurance industry has suffered from court decisions and other trends that have expanded insurance coverage for asbestos claims far beyond the original intent of insurers and policyholders. The Company has received and continues to receive a significant number of asbestos claims. Factors underlying these claim filings include continued intensive advertising by lawyers seeking asbestos claimants and the focus by plaintiffs on defendants, such as manufacturers of talcum powder, who were not traditionally sued and/or primary targets of asbestos litigation. Many defendants have also been subject to increased settlement demands, in part due to the bankruptcy of many traditional primary targets of asbestos litigation. Currently, in many jurisdictions, those who allege very serious injury and who can present credible medical evidence of their injuries are receiving priority trial settings in the courts, while those who have not shown any credible disease manifestation are having their hearing dates delayed or placed on an inactive docket. Prioritizing claims involving credible evidence of injuries, along with the focus on defendants who were not traditionally primary targets of asbestos litigation, contributes to the claims and claim adjustment expense payment patterns experienced by the Company. The Company's asbestos-related claims and claim adjustment expense experience also has been impacted by the unavailability of other insurance sources potentially available to policyholders, whether through exhaustion of policy limits or through the insolvency of other participating insurers.
The Company continues to be involved in disputes, including litigation, with a number of policyholders, some of whom are in bankruptcy, over coverage for asbestos-related claims. Many coverage disputes with policyholders are only resolved through settlement agreements. Because many policyholders make exaggerated demands, it is difficult to predict the outcome of settlement negotiations. Settlements involving bankrupt policyholders may include extensive releases which are favorable to the Company, but which could result in settlements for larger amounts than originally anticipated. Although the Company has seen a reduction in the overall risk associated with these disputes, it remains difficult to predict the ultimate cost of these claims. As in the past, the Company will continue to pursue settlement opportunities.
In addition to claims against policyholders, proceedings have been launched directly against insurers, including the Company, by individuals challenging insurers' conduct with respect to the handling of past asbestos claims and by individuals seeking damages arising from alleged asbestos-related bodily injuries. While the number of direct actions has decreased significantly over time, it is possible that additional direct actions against insurers, including the Company, could be filed in the future. It is difficult to predict the outcome of these proceedings, including whether the plaintiffs would be able to sustain these actions against insurers based on novel legal theories of liability. The Company believes it has meritorious defenses to any such claims and has received favorable rulings in certain jurisdictions.
The Company's net asbestos reserves as of December 31, 2025 and 2024 were $1.36 billion and $1.34 billion, respectively, and include case reserves, IBNR reserves and reserves for the costs of defending asbestos-related coverage litigation. IBNR reserves include amounts for new claims and adverse development on existing policyholders, as well as reserves for claims from policyholders reporting asbestos claims for the first time and for policyholders for which there is, or may be, litigation. 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.
Because each policyholder presents different liability and coverage issues, the Company generally conducts an in-depth asbestos claim review on an annual basis, including a review of domestic policyholders with open claims and litigation cases for potential product and "non-product" liability. Policyholders are identified for this review based upon, among other factors: a combination of past payments and current case reserves in excess of a specified threshold (currently $100,000), perceived level of exposure, number of reported claims, products/completed operations and potential "non-product" exposures, size of policyholder and geographic distribution of products or services sold by the policyholder.
Among the factors the Company may consider in the course of this review are: available insurance coverage, including the role of any umbrella or excess insurance the Company has issued to the policyholder; limits and deductibles; an analysis of the policyholder's potential liability, including as a result of the bankruptcy of other defendants; the jurisdictions involved, including any trends, judicial rulings or legislative actions in those jurisdictions; past and anticipated future claim activity and loss development on pending claims; past settlement values of similar claims; allocated claim adjustment expense; the potential role of other insurance; the role, if any, of non-asbestos claims or potential non-asbestos claims in any resolution process; and applicable coverage defenses or determinations, if any, including the determination as to whether or not an asbestos claim is a products/completed operation claim subject to an aggregate limit and the available coverage, if any, for that claim.
The Company also reviews its asbestos reserves quarterly. These reviews include, as appropriate, an analysis of exposure and claim payment patterns by policyholder, as well as recent settlements, policyholder bankruptcies, judicial rulings and legislative
actions. The Company also analyzes developing payment patterns among policyholders and the assumed reinsurance component of reserves, as well as projected reinsurance billings and recoveries. In addition, the Company reviews its historical gross and net loss and expense paid experience, year-by-year, to assess any emerging trends, fluctuations, or characteristics suggested by the aggregate paid activity. Conventional actuarial methods are not utilized to establish asbestos reserves, and the Company's evaluations have not resulted in a reliable method to determine a meaningful average asbestos defense or indemnity payment.
During the third quarter of 2025, the Company completed its annual in-depth asbestos claim review. While the latest available government data continue to reflect a declining trend in deaths caused by mesothelioma, the number of policyholders with open asbestos claims was relatively flat compared to 2024. Net asbestos paid loss and loss adjustment expenses in 2025, 2024 and 2023 were $261 million, $282 million and $212 million, respectively. Payments on behalf of these policyholders continue to be influenced by the factors described above, including an increase in severity for certain policyholders and a high level of litigation activity in a limited number of jurisdictions where individuals alleging serious asbestos-related injury, primarily mesothelioma, continue to target defendants who were not traditionally sued and/or primary targets of asbestos litigation. The completion of the analyses described above and the annual review in the third quarters of 2025, 2024 and 2023 resulted in $277 million, $242 million and $284 million increases, respectively, to the Company's net asbestos reserves. In each year, the reserve increases were primarily driven by increases in the Company's estimate of projected settlement and defense costs related to a broad number of policyholders. The increase in the estimate of projected settlement and defense costs primarily resulted from payment trends that continue to be higher than previously anticipated due to the continued high level of mesothelioma claim filings and the impact of the current litigation environment surrounding those claims discussed above. The 2023 charge also included an additional increase to strengthen the Company's carried reserve position relative to the range of reasonable estimates.
Over the past decade, the property and casualty insurance industry, including the Company, has experienced net unfavorable prior year reserve development with regard to asbestos reserves, but the Company believes that over that period there has been a reduction in the volatility associated with the Company's overall asbestos exposure as the overall asbestos environment has evolved from one dominated by exposure to significant litigation risks, particularly coverage disputes relating to policyholders in bankruptcy who were asserting that their claims were not subject to the aggregate limits contained in their policies, to an environment primarily driven by a frequency of litigation related to individuals with mesothelioma. The Company's overall view of the current underlying asbestos environment is essentially unchanged from recent periods, and there remains a high degree of uncertainty with respect to future exposure to asbestos claims.
The following table displays activity for asbestos losses and loss adjustment expenses and reserves.
(as of and for the year ended December 31, in millions) 2025 2024 2023
Beginning reserves:
Gross $ 1,708 $ 1,768 $ 1,674
Ceded (370) (390) (369)
Net 1,338 1,378 1,305
Incurred losses and loss adjustment expenses:
Gross 327 279 374
Ceded (50) (37) (90)
Net 277 242 284
Paid loss and loss adjustment expenses:
Gross 337 339 281
Ceded (76) (57) (69)
Net 261 282 212
Foreign exchange and other:
Gross 2 - 1
Ceded (1) - -
Net 1 - 1
Ending reserves:
Gross 1,700 1,708 1,768
Ceded (345) (370) (390)
Net $ 1,355 $ 1,338 $ 1,378
UNCERTAINTY REGARDING ADEQUACY OF ASBESTOS RESERVES
As a result of the processes and procedures discussed above, management believes that the reserves carried for asbestos claims are appropriately established based upon known facts, current law and management's judgment. However, the uncertainties surrounding the final resolution of these claims continue, and it is difficult to determine the ultimate exposure for asbestos claims and related litigation. As a result, these reserves are subject to revision as new information becomes available and as claims develop. The continuing uncertainties include, without limitation:
•the risks and lack of predictability inherent in complex litigation;
•a further increase in the cost to resolve, and/or the number of, asbestos 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 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 claims;
•any impact on asbestos defendants we insure due to the bankruptcy of other asbestos defendants;
•the unavailability of other insurance sources potentially available to policyholders, whether through exhaustion of policy limits or through the insolvency of other participating insurers; and
•uncertainties arising from the insolvency or bankruptcy of policyholders.
Changes in the legal, regulatory and legislative environment may impact the future resolution of asbestos claims and result in adverse loss reserve development. The emergence of a greater number of asbestos claims beyond that which is anticipated may result in adverse loss reserve development. Changes in applicable legislation and future court and regulatory decisions and interpretations, including the outcome of legal challenges to legislative and/or judicial reforms establishing medical criteria for the pursuit of asbestos claims, could affect the settlement of asbestos claims. It is also difficult to predict the ultimate outcome of complex coverage disputes until settlement negotiations near completion and significant legal questions are resolved or, failing settlement, until the dispute is adjudicated. This is particularly the case with policyholders in bankruptcy where
negotiations often involve a large number of claimants and other parties and require court approval to be effective. As part of its continuing analysis of asbestos reserves, the Company continues to study the implications of these and other developments.
Because of the uncertainties set forth above, additional liabilities may arise for amounts in excess of the Company's current reserves. In addition, the Company's estimate of claims and claim adjustment expenses may change. These additional liabilities or increases in estimates, or a range of either, cannot now be reasonably estimated and could result in income statement charges that could be material to the Company's operating results in future periods.
INVESTMENT PORTFOLIO
The Company's invested assets as of December 31, 2025 were $101.18 billion, of which 94% was invested in fixed maturity and short-term investments, 1% in equity securities, 1% in real estate investments and 4% in other investments. Because the primary purpose of the investment portfolio is to fund future claims payments, the Company employs a thoughtful investment philosophy that focuses on appropriate risk-adjusted returns. A significant majority of funds available for investment are deployed in a widely diversified portfolio of high quality, liquid, taxable U.S. government, tax-exempt and taxable U.S. municipal and taxable corporate and U.S. agency mortgage-backed bonds.
The carrying value of the Company's fixed maturity portfolio as of December 31, 2025 was $89.83 billion. The Company closely monitors the duration of its fixed maturity investments, and investment purchases and sales are executed with the objective of having adequate funds available to satisfy the Company's insurance and debt obligations. The weighted average credit quality of the Company's fixed maturity portfolio was "Aa2" as of both December 31, 2025 and 2024. The weighted average credit quality of the Company's fixed maturity portfolio, excluding U.S. Treasury securities, was "Aa3" and "Aa2" as of December 31, 2025 and 2024, respectively. Below investment grade securities represented 1.2% of the total fixed maturity investment portfolio as of both December 31, 2025 and 2024. The weighted average effective duration of fixed maturities and short-term securities was 4.7 (5.0 excluding short-term securities) as of December 31, 2025 and 4.3 (4.5 excluding short-term securities) as of December 31, 2024.
The carrying values of investments in fixed maturities classified as available for sale as of December 31, 2025 and 2024 were as follows:
2025 2024
(as of December 31, in millions) Carrying Value Weighted Average Credit
Quality (1) 		Carrying Value Weighted Average Credit
Quality (1)
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ 3,857 Aa1 $ 5,570 Aaa/Aa1
Obligations of U.S. states, municipalities and political subdivisions:
Local general obligation 20,789 Aaa/Aa1 17,023 Aaa/Aa1
Revenue 9,325 Aaa/Aa1 8,580 Aaa/Aa1
State general obligation 848 Aaa/Aa1 1,010 Aaa/Aa1
Pre-refunded 416 Aa1 572 Aaa/Aa1
Total obligations of U.S. states, municipalities and political subdivisions 31,378 27,185
Debt securities issued by foreign governments 312 Aa1 909 Aaa/Aa1
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
13,232 Aa1 12,605 Aaa/Aa1
Corporate and all other bonds:
Financial:
Bank 4,815 A1 4,425 A1
Insurance 2,704 Aa2 2,404 Aa2
Finance/leasing 71 Ba1 41 Ba3
Brokerage and asset management 119 A2 165 A2
Total financial 7,709 7,035
Industrial 25,299 A3 21,940 A3
Public utility 5,472 A2 4,522 A2
Canadian municipal securities 285 Aa1 1,641 Aa1
Sovereign corporate securities (2)
489 Aaa 635 Aaa
Commercial mortgage-backed securities and project loans (3)
1,314 Aaa/Aa1 1,152 Aaa
Asset-backed and other 486 Aa2 472 Aa2
Total corporate and all other bonds 41,054 37,397
Total fixed maturities $ 89,833 Aa2 $ 83,666 Aa2
___________________________________________
(1)Rated using external rating agencies or by the Company when a public rating does not exist.
(2)Sovereign corporate securities include corporate securities that are backed by a government and include sovereign banks and securities issued under the Federal Ship Financing Programs.
(3)Included in commercial mortgage-backed securities and project loans as of December 31, 2025 and 2024 were $557 million and $327 million of securities guaranteed by the U.S. government, respectively.
The following table sets forth the Company's fixed maturity investment portfolio rated using external ratings agencies or by the Company when a public rating does not exist.
(as of December 31, 2025, in millions)
Carrying
Value 		Percent of Total
Carrying Value
Quality Rating:
Aaa $ 24,898 27.7 %
Aa 33,027 36.7
A 19,660 21.9
Baa 11,198 12.5
Total investment grade 88,783 98.8
Below investment grade 1,050 1.2
Total fixed maturities $ 89,833 100.0 %
Obligations of U.S. States, Municipalities and Political Subdivisions
The Company's fixed maturity investment portfolio as of December 31, 2025 and 2024 included $31.38 billion and $27.19 billion, respectively, of securities which are obligations of U.S. states, municipalities and political subdivisions (collectively referred to as the municipal bond portfolio). The municipal bond portfolio is diversified across the United States, the District of Columbia and Puerto Rico and includes general obligation and revenue bonds issued by states, cities, counties, school districts and similar issuers. Included in the municipal bond portfolio as of December 31, 2025 and 2024 were $416 million and $572 million, respectively, of pre-refunded bonds, which are bonds for which U.S. states or municipalities have established irrevocable trusts, almost exclusively comprised of U.S. Treasury securities and obligations of U.S. government and government agencies and authorities. These trusts were created to fund the payment of principal and interest due under the bonds. The irrevocable trusts are verified as to their sufficiency by an independent verification agent of the underwriter, issuer or trustee. All of the Company's holdings of securities issued by Puerto Rico and related entities have either been pre-refunded and therefore are defeased by U.S. Treasury securities or have FHA guarantees subject to federal appropriation.
The following table shows the geographic distribution of the $30.96 billion of municipal bonds as of December 31, 2025 that were not pre-refunded.
(as of December 31, 2025, in millions)
State General
Obligation 		Local General
Obligation 		Revenue Total Carrying
Value 		Weighted Average
Credit
Quality(1)
State:
Texas $ 94 $ 4,381 $ 1,164 $ 5,639 Aaa
California - 2,155 409 2,564 Aaa/Aa1
Virginia 70 1,119 860 2,049 Aaa
North Carolina 39 904 425 1,368 Aaa
Minnesota 124 1,048 146 1,318 Aaa/Aa1
Wisconsin 126 1,027 33 1,186 Aa1
Maryland - 921 117 1,038 Aaa/Aa1
Colorado - 646 392 1,038 Aaa/Aa1
Tennessee - 943 65 1,008 Aaa/Aa1
Washington 69 723 173 965 Aaa/Aa1
Georgia 156 625 59 840 Aaa/Aa1
Massachusetts - 293 534 827 Aaa/Aa1
South Carolina 38 608 133 779 Aa1
All others (2)
132 5,396 4,815 10,343 Aaa/Aa1
Total $ 848 $ 20,789 $ 9,325 $ 30,962 Aaa/Aa1
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(1)Rated using external rating agencies or by the Company when a public rating does not exist. Ratings shown are the higher of the rating of the underlying issues or the insurer in the case of securities enhanced by third-party insurance for the payment of principal and interest in the event of issuer default.
(2)No other single state accounted for 2.5% or more of the total non-pre-refunded municipal bonds.
The following table displays the funding sources for the $9.33 billion of municipal bonds identified as revenue bonds in the foregoing table as of December 31, 2025.
(as of December 31, 2025, in millions)
Carrying
Value 		Weighted Average
Credit
Quality(1)
Source:
Water $ 2,957 Aaa/Aa1
Higher education 1,981 Aaa/Aa1
Sewer 912 Aaa/Aa1
Special tax 515 Aaa/Aa1
Power utilities 476 Aaa/Aa1
Highway tolls 246 Aa2
Transit 213 Aa1
Housing 210 Aaa
Fuel sales 203 Aaa/Aa1
Health care 172 Aa2
Lease 25 Aaa
Natural gas 6 Aa2
Lottery 3 Aa1
Industrial 1 A2
Other revenue sources 1,405 Aaa/Aa1
Total $ 9,325 Aaa/Aa1
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(1)Rated using external rating agencies or by the Company when a public rating does not exist. Ratings shown are the higher of the rating of the underlying issuer or the insurer in the case of securities enhanced by third-party insurance for the payment of principal and interest in the event of issuer default.
The Company bases its investment decision on the underlying credit characteristics of the municipal security. The weighted average credit rating of the municipal bond portfolio was "Aaa/Aa1" as of December 31, 2025.
Debt Securities Issued by Foreign Governments
The following table shows the geographic distribution of the Company's long-term fixed maturity investments in debt securities issued by foreign governments as of December 31, 2025.
(as of December 31, 2025, in millions)
Carrying
Value 		Weighted Average Credit
Quality (1)
Foreign Government:
Canada $ 220 Aaa/Aa1
United Kingdom 87 Aa3
All others (2,3)
5 Aa3
Total $ 312 Aa1
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(1)Rated using external rating agencies or by the Company when a public rating does not exist.
(2)The Company does not have direct exposure to sovereign debt issued by the Republic of Ireland, Italy, Greece, Portugal or Spain.
(3) No other country accounted for 2.5% or more of total debt securities issued by foreign governments.
Mortgage-Backed Securities, Collateralized Mortgage Obligations and Pass-Through Securities
The Company's fixed maturity investment portfolio as of December 31, 2025 and 2024 included $13.23 billion and $12.61 billion, respectively, of residential mortgage-backed securities, including pass-through-securities and collateralized mortgage
obligations (CMOs), all of which are subject to prepayment risk (either shortening or lengthening of duration). While prepayment risk for securities and its effect on income cannot be fully controlled, particularly when interest rates move dramatically, the Company's investment strategy generally favors securities that reduce this risk within expected interest rate ranges. The Company makes investments in residential CMOs that are either guaranteed by GNMA, FNMA or FHLMC, or if not guaranteed, are senior or super-senior positions within their respective securitizations. Both guaranteed and non-guaranteed residential CMOs allocate the distribution of payments from the underlying mortgages among different classes of bondholders. In addition, non-guaranteed residential CMOs provide structures that allocate the impact of credit losses to different classes of bondholders. Senior and super-senior CMOs are protected, to varying degrees, from credit losses as those losses are initially allocated to subordinated bondholders. The Company's investment strategy is to purchase CMO tranches that are expected to offer the most favorable return given the Company's assessment of associated risks. The Company does not purchase residual interests in CMOs. For more information regarding the Company's investments in residential mortgage-backed securities, see note 3 of the notes to the consolidated financial statements.
Commercial Mortgage-Backed Securities and Project Loans
As of December 31, 2025 and 2024, the Company held commercial mortgage-backed securities (including FHA project loans) of $1.31 billion and $1.15 billion, respectively. For more information regarding the Company's investments in commercial mortgage-backed securities, see note 3 of the notes to the consolidated financial statements.
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.
Other Investments
The Company also invests in private equity, hedge fund and real estate partnerships, and joint ventures. These asset classes have historically provided a higher return than investments in fixed maturities but are subject to more volatility. The Company also enters into certain derivative financial instruments from time to time that are reported as part of other investments. As of December 31, 2025 and 2024, the carrying value of the Company's other investments was $4.12 billion and $4.20 billion, respectively. The Company has unfunded commitments to private equity limited partnerships, real estate partnerships and others in which it invests. These commitments totaled $1.41 billion and $1.49 billion as of December 31, 2025 and 2024, respectively. It is the opinion of the Company's management that the Company has adequate liquidity to meet these commitments.
Securities Lending
The Company has, from time to time, engaged in securities lending activities from which it generates net investment income by lending certain of its investments to other institutions for short periods of time. As of December 31, 2025 and 2024, the Company had $473 million and $586 million, respectively, of securities on loan as part of a tri-party lending agreement. The average monthly balance of securities on loan during 2025 and 2024 was $556 million and $555 million, respectively. 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, 2025 and 2024.
Lloyd's Trust Deposits
The Company meets its capital requirements to support its underwriting at Lloyd's using a combination of the share capital and retained earnings of the Company's subsidiaries participating in Lloyd's, trust deposits and uncollateralized letters of credit. Securities with a fair value of approximately $13 million as of both December 31, 2025 and 2024 were held by a wholly-owned subsidiary, and $89 million and $86 million held by TRV as of December 31, 2025 and 2024, respectively, were pledged into Lloyd's trust accounts to provide a portion of the Lloyd's capital requirements. For more information regarding the Company's utilization of uncollateralized letters of credit, see "Liquidity and Capital Resources" herein.
Net Unrealized Investment Gains (Losses)
The net unrealized investment losses that were included in shareholders' equity were as follows:
(as of December 31, in millions) 2025 2024 2023
Fixed maturities $ (1,859) $ (4,609) $ (3,969)
Other (3) - (1)
Unrealized investment losses before tax (1,862) (4,609) (3,970)
Tax benefit (384) (969) (841)
Net unrealized investment losses included in shareholders' equity at end of year $ (1,478) $ (3,640) $ (3,129)
Net unrealized investment losses included in shareholders' equity were $1.48 billion as of December 31, 2025 compared with $3.64 billion as of December 31, 2024. As of December 31, 2025, the Company had $583 million fixed maturity investments reported at fair value for which fair value was less than 80% of amortized cost. As of December 31, 2024, the Company had $1.12 billion fixed maturity investments reported at fair value for which fair value was less than 80% of amortized cost. 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. 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. Equity securities, which include common and non-redeemable preferred stocks, are reported at fair value with changes in fair value recognized in net income.
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.
As of both December 31, 2025 and 2024, below investment grade securities comprised 1.2%, of the fair value of the Company's fixed maturity investment portfolio. Included in below investment grade securities as of December 31, 2025 were securities in an unrealized loss position that, in the aggregate, had an amortized cost of $464 million and a fair value of $439 million, resulting in a net pre-tax unrealized investment loss of $25 million. These securities in an unrealized loss position represented less than 1% of both the amortized cost and fair value of the fixed maturity portfolio as of December 31, 2025 and accounted for less than 1% of the total gross pre-tax unrealized investment loss in the fixed maturity portfolio as of December 31, 2025.
Impairment Charges
Impairment charges included in net realized investment losses in the consolidated statement of income were $2 million, $10 million and $12 million for the years ended December 31, 2025, 2024 and 2023, respectively. See note 3 of the notes to the consolidated financial statements for further information.
Purchases and Sales of Investment Securities
Purchases and sales of investments are based on cash requirements, the characteristics of the insurance liabilities and current market conditions. The Company identifies investments to be sold to achieve its primary investment goals of assuring the Company's ability to meet policyholder obligations as well as to optimize investment returns, given these obligations.
During the year ended December 31, 2025, the Company incurred pre-tax realized losses of $33 million on the sale of fixed maturity investments having a fair value of $589 million.
CATASTROPHE MODELING
The Company uses various analyses and methods, including proprietary and third-party modeling processes, to make underwriting and reinsurance decisions designed to manage its exposure to catastrophic events. There are no industry-standard methodologies or assumptions for projecting catastrophe exposure. Accordingly, catastrophe estimates provided by different insurers may not be comparable.
The Company actively monitors and evaluates changes in third-party models and, when necessary, calibrates the catastrophe risk model estimates delivered via its own proprietary modeling processes. The Company considers historical loss experience, recent events, underwriting practices, market share analyses, external scientific analysis and various other factors, including non-modeled losses, to refine its proprietary view of catastrophe risk. These proprietary models are updated regularly as new information and techniques emerge.
Based on the proprietary and third-party models utilized by the Company, the tables below set forth, as of December 31, 2025, 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). 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. hurricane in a one-year timeframe would equal or exceed $1.7 billion, or 5% of the Company's common equity as of December 31, 2025.
Dollars (in billions)
Likelihood of Exceedance (1) Single U.S.
Hurricane 		Single U.S.
Earthquake
2.0% (1-in-50) $ 1.5 $ 0.6
1.0% (1-in-100) $ 1.7 $ 0.8
0.4% (1-in-250) $ 3.4 $ 1.3
0.1% (1-in-1,000) $ 9.2 $ 2.3
Percentage of Common Equity (2)
Likelihood of Exceedance Single U.S.
Hurricane 		Single U.S.
Earthquake
2.0% (1-in-50) 4 % 2 %
1.0% (1-in-100) 5 % 2 %
0.4% (1-in-250) 10 % 4 %
0.1% (1-in-1,000) 27 % 7 %
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(1) An event that has, for example, a 2% likelihood of exceedance is sometimes described as a "1-in-50 year event." As noted above, however, the probabilities in the table represent the likelihood of losses from a single event equaling or exceeding the indicated threshold loss amount in a one-year timeframe, not over a multi-year timeframe. Also, because the probabilities relate to a single event, the probabilities do not address the likelihood of more than one event occurring in a particular period, and, therefore, the amounts do not address potential aggregate catastrophe losses occurring in a one-year timeframe.
(2) The percentage of common equity is calculated by dividing (a) indicated loss amounts in dollars by (b) total common equity excluding net unrealized investment gains and losses, net of taxes, included in shareholders' equity. Net unrealized investment gains and losses can be significantly impacted by both discretionary and other economic factors and are not necessarily indicative of operating trends. Accordingly, the Company's management uses the percentage of common equity calculated on this basis as a metric to evaluate the potential impact of a single hurricane or single earthquake on the Company's financial position for purposes of making underwriting and reinsurance decisions.
The loss amounts included in the tables above are based on the Company's in-force portfolio of direct exposures and do not include assumed business. Additionally, the amounts are as of December 31, 2025, reflect the reinsurance program in place at January 1, 2026, are net of reinsurance, after-tax, and exclude unallocated claim adjustment expenses, which historically have been less than 10% of loss estimates. For further information regarding the Company's reinsurance, see "Item 1-Business-Reinsurance." The amounts for hurricanes reflect U.S. exposures and include property exposures, property residual market exposures and an adjustment for certain non-property exposures. The hurricane loss amounts are based on the Company's catastrophe risk model estimates and include losses from the hurricane hazards of wind and storm surge. The amounts for earthquakes reflect U.S. property and workers' compensation exposures. These loss amounts include the effects of exposure growth, inflation and modeling updates based on recent trends and scientific analysis. 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. These inputs reflect a significant amount of judgment and are subject to changes which may result in volatility in the modeled output. Catastrophe modeling output may also fail to account for risks that are outside the range of normal probability or are otherwise unforeseeable. Catastrophe modeling assumptions include, among others, the portion of purchased reinsurance that is collectible after a catastrophic event, which may prove to be materially incorrect. Consequently, catastrophe modeling estimates are subject to significant uncertainty. In the tables above, the uncertainty associated with the estimated threshold loss amounts increases significantly as the likelihood of exceedance decreases. In other words, in the case of a relatively more remote event (e.g., 1-in-1,000), the estimated threshold loss amount is relatively less reliable. Actual losses from an event could materially exceed the indicated threshold loss amount. In addition, more than one such event could occur in any period.
Moreover, the Company is exposed to the risk of material losses from other than property and workers' compensation coverages arising out of hurricanes and earthquakes, and it is exposed to catastrophe losses from perils other than hurricanes and earthquakes, such as tornadoes and other windstorms, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions, solar flares and other naturally-occurring events, as well as acts of terrorism and cyber events.
In addition, compared to models for hurricanes, models for earthquakes are less reliable due to there being a more limited number of significant historical events to analyze, while models for tornadoes, hail storms, wildfires and winter storms are newer and may be less reliable due to the highly random geographic nature and size of these events. Accordingly, these models may be less accurate in predicting risks and estimating losses. Further, changes in climate conditions could cause our underlying modeling data to be less predictive, thus limiting our ability to effectively evaluate and manage catastrophe risk. 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.
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 few decades underscore the unpredictability of climate trends. For example, the frequency and/or severity of hurricane, tornado, hail and wildfire events in the United States have been more volatile during this time period. The insurance industry has experienced increased catastrophe losses due to a number of potential causal factors, including, in addition to weather/climate variability, aging infrastructure, more people living in, and moving to, high-risk areas, population growth in areas with weaker enforcement of building codes, urban expansion, an increase in the number of amenities included in, and average size of, a home and increased inflation, including as a result of post-event demand surge. We believe that changing climate conditions have also likely added to the frequency and severity of natural disasters and created additional uncertainty as to future trends and exposures. Climate studies by government agencies, academic institutions, catastrophe modeling organizations and other groups indicate that an increase in frequency and/or intensity of hurricanes, hail and severe convective storms, 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. Understanding the potential impacts of changing climate conditions is important to the Company's business. Changing climate conditions are expected to evolve over decades. Importantly, because most of its policies renew annually, the Company is able to respond to these changes over time through adjustments to its underwriting strategy, product pricing and related policy terms and conditions, as appropriate. As a result, the Company has focused in recent years on enhancing the strategic management of its catastrophe exposure, adding experts in data science, meteorology, including climate and flood science, wind and structural engineering and geophysics, among other disciplines, to its catastrophe management organization. The Company has also established dedicated teams for each catastrophe peril, with the goal of developing industry-leading scientific and underwriting expertise. This expertise has been incorporated into the Company's product development, risk selection, pricing, capital allocation and claim response.
The Company discusses how changing climate conditions may present other issues for its business under "Item 1A-Risk Factors" and "Outlook", including, but not limited to, the following:
•Increasingly unpredictable and severe weather conditions could result in increased frequency and severity of claims under policies issued by the Company. 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 "-Outlook-Underwriting Gain/Loss." Moreover, the Company's catastrophe models may be less reliable due to the increased unpredictability in frequency and severity of severe weather events, emerging trends in climate conditions and regulatory responses to catastrophe events not being appropriately reflected in the models, in addition to the other factors mentioned above. See "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations-Catastrophe Modeling" and "Item 1A-Risk Factors-We may be adversely affected if our pricing and capital models provide materially different indications than actual results." Accordingly, the Company may be subject to increased losses from catastrophes and other weather-related events.
•Changing climate conditions could also impact the creditworthiness of issuers of securities in which the Company invests. For example, water supply adequacy could impact the creditworthiness of bond issuers with significant assets or business activities in the Southwestern United States; more frequent and/or severe hurricanes could impact the creditworthiness of issuers with significant assets or business activities in the Southeastern United States, among other areas; and increased regulation adopted in response to potential changes in climate conditions could impact the creditworthiness of issuers affected by such regulations. In addition, as issuers of securities in which the Company invests become increasingly focused on mitigating the potential environmental impact of their operations, the costs associated with such initiatives could affect the business models and realized returns of such issuers. See "Item 1A-Risk Factors-Our investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses."
•Increased regulation adopted in response to potential changes in climate conditions may impact the Company and its customers, including state insurance regulations that could impact the Company's ability to manage property exposures in areas vulnerable to significant climate driven losses. For example, state laws have been passed that restrict a carrier's ability to cancel or non-renew certain policies within or adjacent to declared state of emergency zip codes and mandate discounts for risk mitigation practices that may not be effective. If the Company is unable to 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. State and Federal Regulation-Regulatory and Legislative Responses to Catastrophes." In addition, climate change regulation could increase the Company's customers' costs of doing business. For example, insureds faced with carbon management regulatory requirements may have less available capital for investment in loss prevention and safety features which may, over time, increase loss exposures. Increased regulation may also result in reduced economic activity, which would decrease the amount of insurable assets and businesses, and increased claim costs, to the extent such regulations require that damaged homes or businesses be rebuilt according to more expensive specifications.
•The full range of potential liability exposures related to changing climate conditions continues to evolve. For example, from time to time third parties sue our policyholders alleging that they caused or contributed to losses associated with changing climate conditions. In the event any such policyholders were found to be responsible, it could result in them seeking recovery under policies issued by the Company. Through the Company's Casualty Emerging Risk Committee and its Sustainability Committee, the Company works to identify and try to assess climate change-related liability issues, which are continually evolving and often hard to fully evaluate. Through the Company's Property/CAT Committee, the Company regularly reviews emerging issues, including changing climate conditions, to consider potential changes to its modeling and the use of such modeling, as well as to help determine the need for new underwriting strategies, coverage modifications or new products. 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. For additional discussion regarding the Company's reinsurance coverage, see "Part I-Item 1-Business-Reinsurance."
The following table summarizes the composition of the Company's reinsurance recoverables.
(as of December 31, in millions) 2025 2024
Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses $ 4,352 $ 3,962
Gross structured settlements 2,469 2,626
Mandatory pools and associations 1,485 1,531
Gross reinsurance recoverables 8,306 8,119
Allowance for estimated uncollectible reinsurance (135) (119)
Less amounts classified as held for sale 285 -
Net reinsurance recoverables $ 7,886 $ 8,000
The following table presents the Company's top five reinsurer groups by reinsurance recoverable as of December 31, 2025 (in millions). Also included is the A.M. Best rating of the Company's predominant reinsurer from each such reinsurer group as of February 12, 2026.
Reinsurer Group Reinsurance
Recoverable 		A.M. Best Rating of Group's Predominant
Reinsurer
Swiss Re Group $ 737 A+ second highest of 16 ratings
Berkshire Hathaway 435 A++ highest of 16 ratings
Munich Re Group 381 A+ second highest of 16 ratings
Fairfax Financial Group 200 A+ second highest of 16 ratings
Axa Insurance Group 183 A+ second highest of 16 ratings
As of December 31, 2025, the Company held $904 million of collateral in the form of letters of credit, funds and trust agreements held to fully or partially collateralize certain reinsurance recoverables.
Included in net reinsurance recoverables are amounts related to structured settlements, which are annuities purchased from various life insurance companies to settle certain personal physical injury claims, of which workers' compensation claims comprise a significant portion. 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. If it is expected that the life insurance company is not able to pay, the Company would recognize an impairment of the related reinsurance recoverable if, and to the extent, the purchased annuities are not covered by state guaranty associations. 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 as of December 31, 2025 (in millions). Also included is the A.M. Best rating of the Company's predominant insurer from each such insurer group as of February 12, 2026.
Group Structured
Settlements 		A.M. Best Rating of Group's Predominant
Insurer
Fidelity & Guaranty Life Group $ 634 A third highest of 16 ratings
Genworth Financial Group 311 B- eighth highest of 16 ratings
John Hancock Group 214 A+ second highest of 16 ratings
Symetra Financial Corporation 189 A third highest of 16 ratings
Brighthouse Financial, Inc. 161 A third highest of 16 ratings
The Company considers the ratings and related outlook assigned to reinsurance companies and life insurance companies by various independent ratings agencies in assessing the adequacy of its allowance for uncollectible amounts.
OUTLOOK
The following discussion provides outlook information for certain key drivers of the Company's results of operations and capital position.
Premiums. The Company's earned premiums are a function of net written premium volume. Net written premiums comprise both renewal business and new business and are recognized as earned premium over the term of the underlying policies. When business renews, the amount of net written premiums associated with that business may increase or decrease (renewal premium change) as a result of increases or decreases in rate and/or insured exposures, which the Company considers as a measure of units of exposure (such as the number and value of vehicles or properties insured). Net written premiums from both renewal and new business, and therefore earned premiums, are impacted by competitive market conditions as well as general economic conditions, which, particularly in the case of Business Insurance, affect audit premium adjustments, policy endorsements and mid-term cancellations. Net written premiums may also be impacted by the structure of reinsurance programs and related costs, as well as changes in foreign currency exchange rates.
Overall, the Company expects that retention levels (the amount of expiring premium that renews, before the impact of renewal premium changes) will remain strong during 2026.
Property and casualty insurance market conditions are expected to remain competitive during 2026 for new business. In each of the Company's business segments, new business generally has less of an impact on underwriting profitability than renewal
business, given the volume of new business relative to renewal business. However, in periods of meaningful increases in new business, despite its positive impact on underwriting gains over time, the impact of higher new business levels may negatively impact the combined ratio for a period of time. In periods of meaningful decreases in new business, despite its negative impact on underwriting gains over time, the impact of lower new business levels may positively impact the combined ratio for a period of time.
Effective January 1, 2026, the Company renewed a quota share reinsurance agreement with subsidiaries of Fidelis Insurance Holdings Limited (Fidelis) for 2026 pursuant to which the Company assumes 20% of the subject gross written premiums of Fidelis on a risk-attaching basis, subject to a loss ratio cap. The Company's portion of premiums from Fidelis is reported as part of the International results of Business Insurance. The Company also has a minority investment in Fidelis.
Underwriting Gain/Loss.The Company's underwriting gain/loss can be significantly impacted by catastrophe losses and net favorable or unfavorable prior year reserve development, as well as underlying underwriting margins. Underlying underwriting margins can be impacted by a number of factors, including variability in non-catastrophe weather, large loss and other loss activity; changes in current period loss estimates resulting from prior period loss development; changes in loss cost trends; changes in business mix; changes in reinsurance coverages and/or costs; premium adjustments; and variability in expenses and assessments.
Catastrophe losses and non-catastrophe weather-related losses are inherently unpredictable from period to period. The Company's results of operations could be adversely impacted if significant catastrophe and non-catastrophe weather-related losses were to occur.
On average for the ten-year period ended December 31, 2025, the Company experienced approximately 37% of its annual catastrophe losses during the second quarter, primarily arising out of severe wind and hail storms, including tornadoes. Hurricanes, wildfires and winter storms tend to happen at other times of the year and can also have a material impact on the Company's results of operations. Catastrophe losses incurred in a particular quarter in any given year may differ materially from historical experience. In addition, most of the Company's reinsurance programs renew on January 1 or July 1 of each year, and, therefore, any changes to the availability, cost or coverage terms of such programs will be effective after such dates.
Over much of the past decade, the Company's results have included significant amounts of net favorable prior year reserve development driven by better than expected loss experience. However, given the inherent uncertainty in estimating claims and claim adjustment expense reserves, loss experience could develop such that the Company recognizes in future periods higher or lower levels of favorable prior year reserve development, no favorable prior year reserve development or unfavorable prior year reserve development. In addition, the ongoing review of prior year claims and claim adjustment expense reserves, or other changes in current period circumstances, may result in the Company revising current year loss estimates upward or downward in future periods of the current year.
It is possible that changes in economic conditions, the supply chain, international trade, including the impact of tariffs, the labor market and geopolitical tensions, as well as steps taken by federal, state and/or local governments and the Federal Reserve could lead to higher or lower inflation than the Company anticipated, which could in turn lead to an increase or decrease in the Company's loss costs and the need to strengthen or reduce claims and claim adjustment expense reserves. These impacts of inflation on loss costs and claims and claim adjustment expense reserves could be more pronounced for those lines of business that require a relatively longer period of time to finalize and settle claims for a given accident year and, accordingly, are relatively more inflation sensitive. Higher costs of labor, parts and raw materials adversely impacted severity in recent years in our personal and commercial businesses. Tariff and immigration policy could also impact severity. For a further discussion, see "Part I-Item 1A-Risk Factors-If actual claims exceed our claims and claim adjustment expense reserves, or if changes in the estimated level of claims and claim adjustment expense reserves are necessary, including as a result of, among other things, changes in the legal/tort, regulatory and economic environments in which the Company operates, our financial results could be materially and adversely affected."
The Company's results of operations may be impacted by a number of other factors, including an economic slowdown, a recession, financial market volatility, monetary and fiscal policy measures, heightened geopolitical tensions, fluctuations in interest rates and foreign currency exchange rates, the political and regulatory environment, changes to the U.S. Federal budget and potential changes in tax laws.
Investment Portfolio. The Company expects to continue to focus its investment strategy on maintaining a high-quality investment portfolio and a relatively short average effective duration. The weighted average effective duration of fixed maturities and short-term securities was 4.7 (5.0 excluding short-term securities) as of December 31, 2025. 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. As of December 31, 2025, the Company had no open U.S. Treasury futures contracts. The Company regularly evaluates its
investment alternatives and mix. Currently, the majority of the Company's investments are comprised of a widely diversified portfolio of high-quality, liquid, taxable U.S. government, tax-exempt and taxable U.S. municipal, taxable corporate and U.S. agency mortgage-backed bonds.
The Company also invests much smaller amounts in equity securities, real estate and private equity, hedge fund and real estate partnerships, and joint ventures. These investment classes have the potential for higher returns but also the potential for greater volatility and higher degrees of risk, including less stable rates of return and less liquidity.
Approximately 30% of the fixed maturity portfolio is expected to mature over the next three years (including the early redemption of bonds, assuming interest rates (including credit spreads) do not rise significantly by applicable call dates). As a result, the overall yield on and composition of its portfolio could be meaningfully impacted by the types of investments available for reinvestment with the proceeds of maturing bonds.
Net investment income is a material contributor to the Company's results of operations. Based on the Company's current expectations for the impact of expected higher reinvestment yields on the Company's fixed income investments and higher levels of fixed income investments, the Company expects that after-tax net investment income from that portfolio will be approximately $800 million in the first quarter of 2026, increasing to approximately $870 million in the fourth quarter of 2026. This expectation could be impacted by the direction of interest rates and disruptions in global financial markets. Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income or loss from these other investments is generally reflected in the Company's financial statements on a quarter lag basis. The Company's net investment income in future periods from its non-fixed income investment portfolio will be impacted, positively or negatively, by the performance of global financial markets.
The Company had net pre-tax realized investment losses of $48 million in 2025. Changes in global financial markets could result in net realized investment gains or losses in the Company's investment portfolio.
The Company had a net pre-tax unrealized investment loss of $1.86 billion ($1.48 billion after-tax) in its fixed maturity investment portfolio as of December 31, 2025, compared to $4.61 billion ($3.64 billion after-tax) as of December 31, 2024. The net unrealized investment loss is primarily due to the impact of movements in interest rates. The decrease in the net unrealized investment loss in 2025 was due to decreases in interest rates. While the Company does not attempt to predict future interest rate movements, a rising interest rate environment reduces the market value of fixed maturity investments and, therefore, reduces shareholders' equity, and a declining interest rate environment has the opposite effects. The net unrealized loss discussed above is considered temporary in nature as it is not due to credit impairments, there is no impact on expected contractual cash flows from fixed maturities, and the Company generally holds its fixed maturity investments to maturity. 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. Equity securities, which include common and non-redeemable preferred stocks, are reported at fair value with changes in fair value recognized in net income.
Additionally, disruptions in global financial markets could also impact the market value of the Company's investment portfolio. The Company's investment portfolio has benefited from certain tax exemptions (primarily those related to interest from municipal bonds) and certain other tax laws, including, but not limited to, those governing dividends-received deductions and tax credits (such as foreign tax credits). Changes in these laws could adversely impact the value of the Company's investment portfolio. See "Our businesses are heavily regulated by the states and countries in which we conduct business, including licensing, market conduct and financial supervision, and changes in regulation, including 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 Company believes it has a strong capital position and, as part of its ongoing efforts to create shareholder value, expects to continue to return capital not needed to support its business operations to its shareholders, subject to the considerations described below. The Company expects that, generally over time, the combination of dividends to common shareholders and common share repurchases will likely not exceed net income. The Company also expects that to the extent that it continues to grow premium volumes, the level of capital to support the Company's financial strength ratings will also increase, and accordingly, the amount of capital returned to shareholders relative to earnings would be somewhat less than it otherwise would have been absent the growth in premium volumes. Given the Company's very strong capital position and earnings over the past four quarters, the Company currently expects to repurchase approximately $1.80 billion of the Company's common shares in the first quarter of 2026. Included in this amount is $700 million of the net cash proceeds from the sale of the Company's Canadian insurance business (excluding surety) to Definity Financial Corporation. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company's financial position, earnings, share price, catastrophe losses, maintaining appropriate capital levels for business operations, changes in the levels of written premiums, funding of its qualified pension plan, regulatory capital requirements of the operating insurance subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions, changes in tax laws and other factors. For information regarding the Company's common share repurchases in 2025, see "Liquidity and Capital Resources" herein.
As a result of the Company's business outside of the United States, primarily in the United Kingdom (including Lloyd's), the Republic of Ireland, Canada and in Brazil through a joint venture, the Company's capital is also subject to the effects of changes in foreign currency exchange rates. Strengthening of the U.S. dollar in comparison to other currencies could result in a reduction in shareholders' equity, while a weakening of the U.S. dollar in comparison to other currencies could result in an increase in shareholders' equity. For additional discussion of the Company's foreign exchange market risk exposure, see "Part II-Item 7A-Quantitative and Qualitative Disclosures About Market Risk."
Many of the statements in this "Outlook" section and in "Liquidity and Capital Resources" are forward-looking statements, which are subject to risks and uncertainties that are often difficult to predict and beyond the Company's control. Actual results could differ materially from those expressed or implied by such forward-looking statements. Further, such forward-looking statements speak only as of the date of this report and the Company undertakes no obligation to update them. See "-Forward Looking Statements." For a discussion of potential risks and uncertainties that could impact the Company's results of operations or financial position, see "Part I-Item 1A-Risk Factors" and "Critical Accounting Estimates."
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is a measure of a company's ability to generate sufficient cash flows to meet the cash requirements of its business operations and to satisfy general corporate purposes when needed.
Operating Company Liquidity.The liquidity requirements of the Company's insurance subsidiaries are met primarily by funds generated from premiums, fees, income received on investments and investment maturities. Cash provided from these sources is used primarily for claims and claim adjustment expense payments and operating expenses. The insurance subsidiaries' liquidity requirements can be impacted by, among other factors, the timing and amount of catastrophe claims, which are inherently unpredictable, as well as the timing and amount of reinsurance recoveries, which may be affected by reinsurer solvency and reinsurance coverage disputes. Additionally, the variability of asbestos-related claim payments, as well as the volatility of potential judgments and settlements arising out of litigation, may also result in increased liquidity requirements. While an environment of higher interest rates, such as that which occurred during 2023 and 2024, and moderated in 2025, resulted in significant net unrealized investment losses, the net unrealized loss is considered temporary in nature as it is not due to credit impairments, there is no impact on expected contractual cash flows from fixed maturities, and the Company generally holds its high-quality fixed maturity investments to maturity. 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. It is the opinion of the Company's management that the insurance subsidiaries' future liquidity needs will be adequately met from all of the sources described above. 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. TRV's liquidity requirements primarily include shareholder dividends, debt servicing, common share repurchases and, from time to time, contributions to its qualified domestic pension plan. As of December 31, 2025, TRV held total cash and short-term invested assets in the United States aggregating $2.41 billion and having a weighted average
maturity of 23 days. TRV has established a holding company liquidity target equal to its estimated annual pre-tax interest expense and common shareholder dividends (currently approximately $1.37 billion). TRV's holding company liquidity of $2.41 billion as of December 31, 2025 exceeded this target, and it is the opinion of the Company's management that these assets are sufficient to meet TRV's current liquidity requirements.
TRV is not dependent on dividends or other forms of repatriation from its foreign operations to support its liquidity needs. The undistributed earnings of the Company's foreign operations are intended to be permanently reinvested in those operations, and such earnings were not material to the Company's financial position or liquidity as of December 31, 2025.
TRV has a shelf registration statement filed with the Securities and Exchange Commission that expires on June 4, 2028 which permits it to issue securities from time to time. TRV also has a $1.0 billion line of credit facility with a syndicate of financial institutions that expires on June 15, 2027. As of December 31, 2025, the Company had $100 million of commercial paper outstanding. TRV is not reliant on its commercial paper program to meet its operating cash flow needs. The Company has $200 million of senior notes maturing in April 2026.
The Company utilized uncollateralized letters of credit issued by major banks with an aggregate limit of $260 million to provide a portion of the capital needed to support its obligations at Lloyd's as of December 31, 2025. If uncollateralized letters of credit are not available at a reasonable price or at all in the future, the Company can collateralize these letters of credit or may have to seek alternative means of supporting its obligations at Lloyd's, which could include utilizing holding company funds on hand.
Operating Activities
Net cash provided by operating activities was $10.61 billion and $9.07 billion in 2025 and 2024, respectively. The increase in cash flows in 2025 primarily reflected the impacts of higher levels of cash received for premiums, partially offset by higher levels of payments for general and administrative expenses and commissions. The increase in cash received for premiums in 2025 compared to the prior year was impacted by business growth including the impact of positive renewal premium changes.
Investing Activities
Net cash used in investing activities was $7.65 billion and $7.26 billion in 2025 and 2024, respectively. The Company's consolidated total investments as of December 31, 2025 increased by $6.96 billion, or 7% over December 31, 2024, primarily reflecting the impacts of (i) net cash flows provided by operating activities and (ii) lower net unrealized investment losses on investments due to the impact of lower interest rates during 2025, partially offset by (iii) total investments reclassified as held for sale and (iv) net cash used in financing activities.
The Company's investment portfolio is managed to support its insurance operations; accordingly, the portfolio is positioned to meet obligations to policyholders. As such, the primary goals of the Company's asset-liability management process are to satisfy the insurance liabilities and maintain sufficient liquidity to cover fluctuations in projected liability cash flows. Generally, the expected principal and interest payments produced by the Company's fixed maturity portfolio adequately fund the estimated runoff of the Company's insurance reserves. Although this is not an exact cash flow match in each period, the substantial amount by which the market value of the fixed maturity portfolio exceeds the value of the net insurance liabilities, as well as the positive cash flow from newly sold policies and the large amount of high quality liquid bonds, contributes to the Company's ability to fund claim payments without having to sell illiquid assets or access credit facilities.
Financing Activities
Net cash used in financing activities was $2.66 billion and $1.75 billion in 2025 and 2024, respectively. The totals in both 2025 and 2024 reflected common share repurchases and dividends paid to shareholders, partially offset by the net proceeds from employee stock option exercises. The total in 2025 also included net proceeds from the issuance of debt. Common share repurchases in 2025 and 2024 were $3.13 billion and $1.12 billion, respectively.
Debt Transactions.
2025. On July 24, 2025, the Company issued a total of $1.25 billion of debt in two tranches:
•$500 million aggregate principal amount of 5.05% senior notes that will mature on July 24, 2035 (the "2035 notes"), and
•$750 million aggregate principal amount of 5.70% senior notes that will mature on July 24, 2055 (the "2055 notes" and together with the 2035 notes, the "senior notes").
The net proceeds of the issuance, after deducting the underwriting discount and expenses payable by the Company, totaled approximately $1.23 billion. Interest on the senior notes is payable semi-annually in arrears on January 24 and July 24.
The 2035 notes may be redeemed prior to April 24, 2035, in whole or in part, at the Company's option, at any time or from time to time, at a redemption price equal to the greater of (a) 100% of the principal amount of any 2035 notes to be redeemed or (b) the sum of the present values of the remaining scheduled payments of principal and interest to but excluding April 24, 2035 on any 2035 notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the then current Treasury Rate (as defined in the 2035 notes), plus 15 basis points. On or after April 24, 2035, the 2035 notes may be redeemed, in whole or in part, at the Company's option, at any time or from time to time, at a redemption price equal to 100% of the principal amount of any 2035 notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
The 2055 notes may be redeemed prior to January 24, 2055, in whole or in part, at the Company's option, at any time or from time to time, at a redemption price equal to the greater of (a) 100% of the principal amount of any 2055 notes to be redeemed or (b) the sum of the present values of the remaining scheduled payments of principal and interest to but excluding January 24, 2055 on any 2055 notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the then current Treasury Rate (as defined in the 2055 notes), plus 15 basis points. On or after January 24, 2055, the 2055 notes may be redeemed, in whole or in part, at the Company's option, at any time or from time to time, at a redemption price equal to 100% of the principal amount of any 2055 notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
Dividends.Dividends paid to shareholders were $979 million and $951 million in 2025 and 2024, respectively. The declaration and payment of future dividends to holders of the Company's common stock will be at the discretion of the Company's Board of Directors and will depend upon many factors, including the Company's financial position, earnings, capital requirements of the Company's operating subsidiaries, legal requirements, regulatory constraints and other factors as the Board of Directors deems relevant. Dividends will be paid by the Company only if declared by its Board of Directors out of funds legally available, subject to any other restrictions that may be applicable to the Company. On January 21, 2026, the Company announced that its Board of Directors declared a regular quarterly dividend of $1.10 per share, payable March 31, 2026, to shareholders of record on March 10, 2026.
Share Repurchases.The Company's Board of Directors has approved common share repurchase authorizations under which repurchases may be made from time to time in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, in private transactions or otherwise. The authorizations do not have a stated expiration date. The Company expects that, generally over time, the combination of dividends to common shareholders and common share repurchases will likely not exceed net income. The Company also expects that to the extent that it continues to grow premium volumes, the amount of capital returned to shareholders relative to earnings would be somewhat less than it otherwise would have been absent the growth in premium volumes. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company's financial position, earnings, share price, catastrophe losses, maintaining appropriate capital levels for business operations, changes in the levels of written premiums, funding of its qualified pension plan, regulatory capital requirements of the operating insurance subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions, changes in tax laws and other factors. During 2025, the Company repurchased 10.9 million shares under its share repurchase authorizations, for a total of $3.03 billion. The average cost per share repurchased was $277.17. Common share repurchases in 2025 were higher than the total of $1.00 billion in 2024. The cost of the treasury stock acquired pursuant to common share repurchases includes the 1% federal excise tax imposed as part of the Inflation Reduction Act of 2022. As of December 31, 2025, the Company had $2.02 billion of capacity remaining under its share repurchase authorizations. The most recent authorization was approved by the Board of Directors on January 21, 2026 and added $5.0 billion of repurchase capacity to the $2.02 billion capacity remaining at that date, which was previously approved by the Board of Directors on April 19, 2023.
From the inception of the first authorization on May 2, 2006 through December 31, 2025, the Company has repurchased a cumulative total of 559.2 million shares for a total of $43.99 billion, or an average of $78.66 per share.
In both 2025 and 2024, the Company acquired 0.7 million shares of common stock 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 exercise price, as well as the related payroll withholding taxes, for stock options that were exercised.
Capital Resources
Capital resources reflect the overall financial strength of the Company and its ability to borrow funds at competitive rates and raise new capital to meet its needs. The following table summarizes the components of the Company's capital structure as of December 31, 2025 and 2024.
(as of December 31, in millions) 2025 2024
Debt:
Short-term $ 300 $ 100
Long-term 9,054 8,004
Net unamortized fair value adjustments and debt issuance costs (87) (71)
Total debt 9,267 8,033
Shareholders' equity:
Common stock and retained earnings, less treasury stock 35,394 32,831
Accumulated other comprehensive loss (2,500) (4,967)
Total shareholders' equity 32,894 27,864
Total capitalization $ 42,161 $ 35,897
Total capitalization as of December 31, 2025 was $42.16 billion, $6.26 billion higher than at December 31, 2024, primarily reflecting the impacts of (i) net income of $6.29 billion, (ii) other comprehensive income of $2.47 billion, primarily reflecting a decrease in net unrealized losses on investments due to a change in interest rates during 2025, (iii) an increase in debt outstanding of $1.23 billion and (iv) proceeds from the exercise of employee share options of $214 million, partially offset by (v) common share repurchases totaling $3.03 billion under the Company's share repurchase authorizations and (vi) shareholder dividends of $987 million.
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.
(as of December 31, dollars in millions) 2025 2024
Total capitalization $ 42,161 $ 35,897
Less: net unrealized losses on investments, net of taxes, included in shareholders' equity (1,478) (3,640)
Total capitalization excluding net unrealized losses on investments, net of taxes, included in shareholders' equity $ 43,639 $ 39,537
Debt-to-total capital ratio 22.0 % 22.4 %
Debt-to-total capital ratio excluding net unrealized losses on investments, net of taxes, included in shareholders' equity 21.2 % 20.3 %
The debt-to-total capital ratio excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders' equity, is calculated by dividing (a) debt by (b) total capitalization excluding net unrealized gains and losses on investments, net of taxes, included in shareholders' equity. Net unrealized gains and losses on investments can be significantly impacted by both interest rate movements and other economic factors. Accordingly, in the opinion of the Company's management, the debt-to-total capital ratio calculated on this basis provides another useful metric for investors to understand the Company's financial leverage position. The Company's ratio of debt-to-total capital excluding after-tax net unrealized investment losses included in shareholders' equity of 21.2% as of December 31, 2025 was within the Company's target range of 15% to 25%.
Credit Agreement. The Company is a party to a five-year, $1.0 billion revolving credit agreement with a syndicate of financial institutions that expires on June 15, 2027. Terms of the credit agreement are discussed in more detail in note 9 of the notes to the consolidated financial statements.
Shelf Registration. The Company has filed a universal shelf registration statement with the Securities and Exchange Commission that expires on June 4, 2028 for the potential offering and sale of securities. The Company may offer these securities from time to time at prices and on other terms to be determined at the time of offering.
Share Repurchase Authorizations. As of December 31, 2025, the Company had $2.02 billion of capacity remaining under its share repurchase authorizations approved by the Board of Directors.
Cash Requirements from Contractual and Other Obligations
The following table summarizes, as of December 31, 2025, the Company's estimated future payments under material contractual obligations and estimated claims and claim-related payments. The table includes only obligations as of December 31, 2025 that are expected to be settled in cash and excludes amounts held for sale.
The table below includes the amount and estimated future timing of claims and claim-related payments. The amounts do not represent the exact liability, but instead represent estimates, generally utilizing actuarial projection techniques, at a given accounting date. These estimates include expectations of what the ultimate settlement and administration of claims will cost based on the Company's assessment of facts and circumstances known, review of historical settlement patterns, estimates of trends in claims severity, frequency, legal theories of liability and other factors. Variables in the reserve estimation process can be affected by both internal and external events, such as changes in claims handling procedures, economic inflation or deflation, legal trends and legislative changes. Many of these items are not directly quantifiable, particularly on a prospective basis. Additionally, there may be significant reporting lags between the occurrence of the policyholder event and the time it is actually reported to the insurer. The future cash flows related to the items contained in the table below required estimation of both amount (including severity considerations) and timing. Amount and timing are frequently estimated separately. An estimation of both amount and timing of future cash flows related to claims and claim-related payments has unavoidable estimation uncertainty.
The material cash requirements from contractual and other obligations as of December 31, 2025 were as follows:
Payments Due by Period (in millions) Total Less than
1 Year 		1-3
Years 		3-5
Years 		After 5
Years
Debt
Senior notes $ 9,000 $ 200 $ - $ - $ 8,800
Junior subordinated debentures 254 - 125 - 129
Total debt principal 9,254 200 125 - 8,929
Interest 8,185 449 873 864 5,999
Total long-term debt obligations (1)
17,439 649 998 864 14,928
Real estate and other operating leases (2)
332 78 124 64 66
Information systems-related commitments (3)
988 566 361 61 -
Unfunded investment commitments (4)
1,409 280 423 483 223
Estimated claims and claim-related payments
Claims and claim adjustment expenses (5)
64,436 15,328 17,067 8,463 23,578
Claims from large deductible policies (6)
- - - - -
Total estimated claims and claim-related payments 64,436 15,328 17,067 8,463 23,578
Total $ 84,604 $ 16,901 $ 18,973 $ 9,935 $ 38,795
________________________________________
(1)See note 9 of the notes to the consolidated financial statements for a further discussion of outstanding indebtedness. Because the amounts reported in the foregoing table include principal and interest, the total long-term debt obligations will not agree with the amounts reported in note 9.
(2)Represents agreements entered into in the ordinary course of business to lease office space, equipment and furniture.
(3)Includes agreements with vendors to purchase system software (including software as a service), software maintenance services and technology-related costs.
(4)Represents estimated timing for fulfilling unfunded commitments for private equity limited partnerships, real estate partnerships and other investments.
(5)The amounts in "Claims and claim adjustment expenses" in the table above represent the estimated timing of future payments for both reported and unreported claims incurred and related claim adjustment expenses, gross of reinsurance recoverables, excluding structured settlements expected to be paid by annuity companies.
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. Since the timing and amount of cash inflows from such reinsurance agreements are directly related to the underlying payment of claims and claim adjustment expenses by the insurer, reinsurance recoverables are recognized in a manner consistent with the liabilities (the estimated liability for claims and claim adjustment expenses) relating to the underlying reinsured contracts. The presence of any feature that can delay timely reimbursement of claims by a reinsurer results in the reinsurance contract being accounted for as a deposit rather than reinsurance. The assumptions used in estimating the amount and timing of the reinsurance recoverables are consistent with those used in estimating the amount and timing of the related liabilities.
The estimated future cash inflows from the Company's reinsurance contracts that qualify for reinsurance accounting are as follows:
(in millions) Total Less than 1
Year 		1-3
Years 		3-5
Years 		After 5
Years
Reinsurance recoverables $ 5,221 $ 908 $ 1,142 $ 641 $ 2,530
The Company manages its business and evaluates its liabilities for claims and claim adjustment expenses on a net of reinsurance basis. The estimated cash flows on a net of reinsurance basis are as follows:
(in millions) Total Less than 1
Year 		1-3
Years 		3-5
Years 		After 5
Years
Claims and claim adjustment expenses, net
$ 59,215 $ 14,420 $ 15,925 $ 7,822 $ 21,048
For business underwritten by non-U.S. operations, future cash flows related to reported and unreported claims incurred and related claim adjustment expenses were translated at the spot rate on December 31, 2025.
The amounts reported in the table above and in the table of reinsurance recoverables above are presented on a nominal basis and have not been adjusted to reflect the time value of money. Accordingly, the amounts above will differ from the Company's balance sheet to the extent that the liability for claims and claim adjustment expenses and the related reinsurance recoverables have been discounted in the balance sheet. See note 1 of the notes to the consolidated financial statements.
(6) Workers' compensation large deductible policies provide third-party coverage in which the Company typically is responsible for paying the entire loss under such policies and then seeks reimbursement from the insured for the deductible amount. "Claims from large deductible policies" represent the estimated future payment for claims and claim related expenses below the deductible amount, net of the estimated recovery of the deductible. The liability and the related deductible receivable for unpaid claims are presented in the consolidated balance sheet as "contractholder payables" and "contractholder receivables," respectively. Most deductibles for such policies are paid directly from the policyholder's escrow, which is periodically replenished by the policyholder. The payment of the loss amounts above the deductible are reported within "Claims and claim adjustment expenses" in the above table. Because the timing of the collection of the deductible (contractholder receivables) occurs shortly after the payment of the deductible to a claimant (contractholder payables), these cash flows offset each other in the table.
The estimated timing of the payment of the contractholder payables and the collection of contractholder receivables (net of allowance for expected credit losses) for workers' compensation policies is presented below:
(in millions) Total Less than 1
Year 		1-3
Years 		3-5
Years 		After 5
Years
Contractholder payables/receivables $ 3,010 $ 968 $ 924 $ 402 $ 716
The above table does not include an analysis of liabilities reported for structured settlements for which the Company has purchased annuities and remains contingently liable in the event of default by the company issuing the annuity. The Company is not reasonably likely to incur material future payment obligations under such agreements. In addition, the Company is not currently subject to any minimum funding requirements for its qualified pension plan. Accordingly, future contributions are not included in the foregoing table.
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. The insurance holding company laws of Connecticut applicable to the Company's subsidiaries requires notice to, and approval by, the state insurance commissioner for the declaration or payment of any dividend that, together with other distributions made within the preceding twelve months, exceeds the greater of 10% of the insurer's statutory capital and surplus as of the preceding December 31, or the insurer'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. This declaration or payment is further limited by adjusted unassigned surplus, as determined in accordance with statutory accounting practices. The insurance holding company laws of other states in which the Company's subsidiaries are domiciled generally contain similar, although in some instances somewhat more restrictive, limitations on the payment of dividends. A maximum of $5.92 billion is available by the end of 2026 for such dividends to ultimately be paid to the holding company, TRV, without prior approval of the Connecticut Insurance Department. The Company may choose to accelerate the timing within 2026 and/or increase the amount of dividends from its insurance subsidiaries in 2026, which could result in certain dividends being subject to approval by the Connecticut Insurance Department prior to payment.
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 Company to maintain a minimum consolidated net worth as described in note 9 of the notes to the consolidated financial statements.
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 as of December 31, 2025.
The U.S. insurance subsidiaries paid dividends of $3.25 billion and $2.00 billion during 2025 and 2024, respectively.
Pension and Other Postretirement Benefit Plans
The Company sponsors a qualified non-contributory defined benefit pension plan (the qualified domestic pension plan), which covers substantially all U.S. domestic employees and provides benefits primarily under a cash balance formula. In addition, the Company sponsors a nonqualified defined benefit pension plan which covers certain highly-compensated employees, pension plans for employees of its foreign subsidiaries, and a postretirement health and life insurance benefit plan for employees satisfying certain age and service requirements and for certain retirees.
The qualified domestic pension plan is subject to regulations under the Employee Retirement Income Security Act of 1974 as amended (ERISA), which requires plans to meet minimum standards of funding and requires such plans to subscribe to plan termination insurance through the Pension Benefit Guaranty Corporation (PBGC). The Company does not have a minimum funding requirement for the qualified domestic pension plan for 2026 and does not anticipate having a minimum funding requirement in 2027. The Company has significant discretion in making contributions above those necessary to satisfy the minimum funding requirements. In 2025, 2024 and 2023, there was no minimum funding requirement for the qualified domestic pension plan. In 2025, 2024 and 2023, the Company made no voluntary contributions to the qualified domestic pension plan. The qualified domestic pension plan had a funded status of 132% and 130% as of December 31, 2025 and 2024, respectively. Based on its funded status as of December 31, 2025, the Company does not currently anticipate making a voluntary contribution to the qualified domestic pension plan in 2026. In determining future contributions, the Company will consider the performance of the plan's investment portfolio, the effects of interest rates on the projected benefit obligation of the plan and the Company's other capital requirements.
The qualified domestic pension plan assets are managed to maximize long-term total return while maintaining an appropriate level of risk. The Company's overall investment strategy is to achieve a mix of approximately 85% to 90% of investments for long-term growth and 10% to 15% for near-term benefit payments with a diversification of asset types, fund strategies and fund managers. The current target allocations for plan assets are 55% to 65% equity securities and 20% to 40% fixed income securities, with the remainder allocated to short-term securities. For 2026, the Company plans to apply an expected long-term rate of return on plan assets of 7.00%, comparable with 2025. The expected rate of return reflects the Company's current expectations with regard to long-term returns in the capital markets, taking into account the pension plan's asset allocation targets, the historical performance and current valuation of U.S. and international equities, and the level of long term interest rate and inflation expectations.
For further discussion of the pension and other postretirement benefit plans, see note 15 of the notes to the consolidated financial statements.
Risk-Based Capital
The NAIC has an RBC requirement for most property and casualty insurance companies, which determines minimum capital requirements and is intended to raise the level of protection for policyholder obligations. The Company's U.S. insurance subsidiaries are subject to these NAIC RBC requirements based on laws that have been adopted by individual states. These requirements subject insurers having policyholders' surplus less than that required by the RBC calculation to varying degrees of regulatory action, depending on the level of capital inadequacy. Each of the Company's U.S. insurance subsidiaries had policyholders' surplus as of December 31, 2025 significantly above the level at which any RBC regulatory action would occur. Regulators in the jurisdictions in which the Company's foreign insurance subsidiaries are located require insurance companies to maintain certain levels of capital depending on, among other things, the type and amount of insurance policies written. Each of the Company's foreign insurance subsidiaries had capital significantly above their respective regulatory requirements as of December 31, 2025.
Off-Balance Sheet Arrangements
The Company has entered into certain contingent obligations for guarantees related to selling businesses to third parties, certain investments, certain insurance policy obligations of former insurance subsidiaries and various other indemnifications. See note 17 of the notes to the consolidated financial statements. The Company does not believe it is reasonably likely that these arrangements will have a material current or future effect on the Company's financial position, changes in financial position, revenues and expenses, results of operations, liquidity, capital expenditures or capital resources.
CRITICAL ACCOUNTING ESTIMATES
The Company considers its most significant accounting estimates to be those applied to claims and claim adjustment expense reserves and related reinsurance recoverables, and impairments of investments, goodwill and other intangible assets.
Claims and Claim Adjustment Expense Reserves
Gross claims and claim adjustment expense reserves by product line were as follows:
December 31, 2025 December 31, 2024
(in millions) Case IBNR Total Case IBNR Total
General liability $ 6,036 $ 12,769 $ 18,805 $ 5,845 $ 11,349 $ 17,194
Commercial property 1,270 465 1,735 1,384 342 1,726
Commercial multi-peril 3,180 3,818 6,998 3,015 3,438 6,453
Commercial automobile 2,883 3,754 6,637 2,749 3,195 5,944
Workers' compensation 10,195 8,224 18,419 9,980 8,749 18,729
Fidelity and surety 146 654 800 210 571 781
Personal automobile 2,326 2,523 4,849 2,315 2,588 4,903
Personal homeowners and other 1,577 1,980 3,557 1,238 1,833 3,071
International and other 2,762 3,081 5,843 2,561 2,726 5,287
Property-casualty 30,375 37,268 67,643 29,297 34,791 64,088
Accident and health 3 - 3 5 - 5
Less amounts classified as held for sale 1,123 786 1,909 - - -
Claims and claim adjustment expense reserves $ 29,255 $ 36,482 $ 65,737 $ 29,302 $ 34,791 $ 64,093
The $3.56 billion increase in gross claims and claim adjustment expense reserves since December 31, 2024 primarily reflected the impacts of (i) catastrophe losses in 2025, (ii) higher volumes of insured exposures and (iii) loss cost trends for the current accident year, partially offset by (iv) claim payments made during 2025 and (v) net favorable prior year reserve development.
Asbestos reserves are included in the General liability, Commercial multi-peril and International and other lines in the foregoing summary table. Asbestos reserves are discussed separately; see "Asbestos Claims and Litigation" and "Uncertainty Regarding Adequacy of Asbestos Reserves" herein.
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 (IBNR) as of the balance sheet date. Claims and claim adjustment expense reserves do not represent an exact calculation of liability, but instead represent management estimates, primarily utilizing actuarial expertise and projection methods. These estimates are expectations of what the ultimate settlement and administration of claims will cost upon final resolution in the future, based on the Company's assessment of facts and circumstances then known, review of historical settlement patterns, estimates of trends in claims severity and frequency, expected interpretations of legal theories of liability and other factors. In establishing gross claims and claim adjustment expense reserves, the Company also considers salvage and subrogation. Estimated recoveries from reinsurance are included in "Reinsurance Recoverables" as an asset on the Company's consolidated balance sheet. The claims and claim adjustment expense reserves are reviewed regularly by qualified actuaries employed by the Company.
The process of estimating claims and claim adjustment expense reserves involves a high degree of judgment and is subject to a number of variables. These variables can be affected by both internal and external events, such as changes in claims handling procedures, changes in individuals involved in the reserve estimation process, economic inflation, changes in the tort environment, legal trends and legislative changes, among others. The impact of many of these items on ultimate costs for claims and claim adjustment expenses is difficult to estimate. Estimation difficulties also differ significantly by product line due to differences in claim complexity, the volume of claims, the potential severity of individual claims, the determination of occurrence date for a claim and reporting lags (the time between the occurrence of the policyholder event and when it is actually reported to the insurer). Informed judgment is applied throughout the process, including the application of various individual experiences and expertise to multiple sets of data and analyses. The Company refines its estimates in a regular ongoing process as historical loss experience develops and additional claims are reported and settled. The Company rigorously attempts to consider all significant facts and circumstances known at the time claims and claim adjustment expense reserves are established. Due to the inherent uncertainty underlying these estimates including, but not limited to, the future settlement environment, final resolution of the estimated liability for claims and claim adjustment expenses may be higher or lower than the related claims and claim adjustment expense reserves at the reporting date. Therefore, actual paid losses, as claims are settled in the future, may be materially different than the amount currently recorded-favorable or unfavorable. Because establishment of claims and claim adjustment expense reserves is an inherently uncertain process involving estimates and the application of judgment, currently established claims and claim adjustment expense reserves may change. The Company reflects adjustments to the reserves in the results of operations in the period the estimates are changed.
There are also additional risks which impact the estimation of ultimate costs for catastrophes. For example, the estimation of reserves related to hurricanes, tornadoes, wildfires and other catastrophic events can be affected by the inability of the Company and its insureds to access portions of the impacted areas, the complexity of factors contributing to the losses, the legal and regulatory uncertainties, including the interpretation of policy terms and conditions, and the nature of the information available to establish the reserves. Complex factors include, but are not limited to: determining whether damage was caused by flooding versus wind; evaluating general liability and pollution exposures; estimating additional living expenses; estimating the impact of demand surge, infrastructure disruption, fraud, the effect of mold damage and business interruption costs; and reinsurance collectibility. The timing of a catastrophe, such as at or near the end of a reporting period, can also affect the information available to the Company in estimating reserves for that reporting period. The estimates related to catastrophes are adjusted as actual claims emerge.
A portion of the Company's gross claims and claim adjustment expense reserves (totaling $1.70 billion as of December 31, 2025) are for asbestos claims and related litigation. While the ongoing review of asbestos claims and associated liabilities considers the inconsistencies of court decisions as to coverage, plaintiffs' expanded theories of liability and the risks inherent in complex litigation and other uncertainties, in the opinion of the Company's management, it is possible that the outcome of the continued uncertainties regarding these claims could result in liability in future periods that differs from current insurance reserves by an amount that could be material to the Company's future operating results. See the preceding discussion of "Asbestos 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. Data on individual reported claims, both current and historical, including paid amounts and individual claim adjuster estimates, are grouped by common characteristics (components) and evaluated by actuaries in their analyses of ultimate claim liabilities. Such data is occasionally supplemented with external data as available and when appropriate. The process of analyzing reserves for a component is undertaken on a regular basis, generally quarterly, in light of continually updated information.
Multiple estimation methods are available for the analysis of ultimate claim liabilities. Each estimation method has its own set of assumption variables and its own advantages and disadvantages, with no single estimation method being better than the
others in all situations and no one set of assumption variables being meaningful for all product line components. The relative strengths and weaknesses of the particular estimation methods when applied to a particular group of claims can also change over time. Therefore, the actual choice of estimation method(s) can change with each evaluation. The estimation method(s) chosen are those that are believed to produce the most reliable indication at that particular evaluation date for the claim liabilities being evaluated.
In most cases, multiple estimation methods will be valid for the particular facts and circumstances of the claim liabilities being evaluated. This will result in a range of reasonable estimates for any particular claim liability. The Company uses such range analyses to back test whether previously established estimates for reserves by reporting segments are reasonable, given available information. Reported values found to be closer to the endpoints of a range of reasonable estimates are subject to further detailed reviews. These reviews may substantiate the validity of management's recorded estimate or lead to a change in the reported estimate.
The exact boundary points of these ranges are more qualitative than quantitative in nature, as no clear line of demarcation exists to determine when the set of underlying assumptions for an estimation method switches from being reasonable to unreasonable. As a result, the Company does not believe that the endpoints of these ranges are or would be comparable across companies. In addition, potential interactions among the different estimation assumptions for different product lines make the aggregation of individual ranges a highly judgmental and inexact process.
Property-casualty insurance policies are either written on a "claims-made" or on an "occurrence" basis. Claims-made policies generally cover, subject to requirements in individual policies, claims reported during the policy period. Policies that are written on an occurrence basis require that the insured demonstrate that a loss occurred in the policy period, even if the insured reports the loss many years later.
Most general liability policies are written on an occurrence basis. These policies are subject to substantial loss development over time as facts and circumstances change in the years following the policy issuance. The occurrence form, which accounts for much of the reserve development in asbestos exposures, is also used to provide coverage for construction general liability, including construction defect. Occurrence-based forms of insurance for general liability exposures require substantial projection of loss trends, which can be influenced by a number of factors, including future inflation, judicial interpretations and societal litigation trends (e.g., size of jury awards and propensity of individuals to pursue litigation), among others.
A basic premise in most actuarial analyses is that past patterns demonstrated in the data will repeat themselves in the future, absent a material change in the associated risk factors discussed below. To the extent a material change affecting the ultimate claim liability is known, such change is estimated to the extent possible through an analysis of internal company data and, if available and when appropriate, external data. Such a measurement is specific to the facts and circumstances of the particular claim portfolio and the known change being evaluated. Significant structural changes to the available data, product mix or organization can materially impact the reserve estimation process. In addition, the introduction of new products creates a unique risk as historical company data would typically not be available.
Informed judgment is applied throughout the reserving process. This includes the application of various individual experiences and expertise to multiple sets of data and analyses. In addition to actuaries, experts involved with the reserving process also include underwriting and claims personnel and lawyers, as well as other company management. Therefore, management may have to consider varying individual viewpoints as part of its estimation of claims and claim adjustment expense reserves. It is also likely that during periods of significant change, such as a merger, consistent application of informed judgment becomes even more complicated and difficult.
The variables discussed above in this general discussion have different impacts on reserve estimation uncertainty for a given product line, depending on the length of the claim tail, the reporting lag, the impact of individual claims and the complexity of the claim process for a given product line.
Product lines are generally classifiable as either long tail or short tail, based on the average length of time between the event triggering claims under a policy and the final resolution of those claims. Short tail claims are reported and settled quickly, resulting in less estimation variability. The longer the time to final claim resolution, the greater the exposure to estimation risks and hence the greater the estimation uncertainty.
A major component of the claim tail is the reporting lag. The reporting lag, which is the time between the event triggering a claim and the reporting of the claim to the insurer, makes estimating IBNR inherently more uncertain. In addition, the greater the reporting lag, the greater the proportion of IBNR to the total claim liability for the product line. Writing new products with material reporting lags can result in adding several years' worth of IBNR claim exposure before the reporting lag exposure becomes clearly observable, thereby increasing the risk associated with estimating the liabilities for claims and claim
adjustment expenses for such products. The most extreme example of claim liabilities with long reporting lags are asbestos claims.
For some lines, the impact of large individual claims can be material to the analysis. These lines are generally referred to as being "low frequency/high severity," while lines without this "large claim" sensitivity are referred to as "high frequency/low severity." Estimates of claim liabilities for low frequency/high severity lines can be sensitive to the impact of a small number of potentially large claims. As a result, the role of judgment is much greater for these reserve estimates. In contrast, for high frequency/low severity lines the impact of individual claims is relatively minor and the range of reasonable reserve estimates is likely narrower and more stable.
Claim complexity can also greatly affect the estimation process by impacting the number of assumptions needed to produce the estimate, the potential stability of the underlying data and claim process, and the ability to gain an understanding of the data. Product lines with greater claim complexity, such as for certain surety and construction exposures, have inherently greater estimation uncertainty.
Actuaries have to exercise a considerable degree of judgment in the evaluation of all these factors in their analysis of reserves. The human element in the application of actuarial judgment is unavoidable when faced with material uncertainty. Different actuaries may choose different assumptions when faced with such uncertainty, based on their individual backgrounds, professional experiences and areas of focus. Hence, the estimates selected by the various actuaries may differ materially from each other.
Lastly, significant structural changes to the available data, product mix or organization can also materially impact the reserve estimation process. Events such as mergers increase the inherent uncertainty of reserve estimates for a period of time, until stable trends re-establish themselves within the new organization.
Risk Factors
The major causes of material uncertainty ("risk factors") generally will vary for each product line, as well as for each separately analyzed component of the product line. In a few cases, such risk factors are explicit assumptions of the estimation method, but in most cases, they are implicit. For example, a method may explicitly assume that a certain percentage of claims will close each year, but will implicitly assume that the legal interpretation of existing contract language will remain unchanged. Actual results will likely vary from expectations for each of these assumptions, causing actual paid losses, as claims are settled in the future, to be different in amount than the reserves being estimated currently.
Some risk factors will affect more than one product line. Examples include changes in claim department practices, changes in the tort environment, changes in settlement patterns, regulatory and legislative actions, court actions, timeliness of claim reporting, state mix of claimants, medical utilization and degree of claimant fraud. The extent of the impact of a risk factor will also vary by components within a product line. Individual risk factors are also subject to interactions with other risk factors within product line components.
The effect of a particular risk factor on estimates of claim liabilities cannot be isolated in most cases. 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. For example, the timing of claims payments in one geographic region may be impacted if claim adjusters are temporarily reassigned from that region to help settle catastrophe claims in another region.
While some changes in the claim environment are sudden in nature (such as a new court ruling affecting the interpretation of all contracts in that jurisdiction), others are more evolutionary. Evolutionary changes can occur when multiple factors affect final claim values, with the uncertainty surrounding each factor being resolved separately, in stepwise fashion. The final impact is not known until all steps have occurred.
Sudden changes generally cause a one-time shift in claim liability estimates, although there may be some lag in reliable quantification of their impact. Evolutionary changes generally cause a series of shifts in claim liability estimates, as each component of the evolutionary change becomes evident and estimable.
Actuarial Methods for Analyzing and Estimating Claims and Claim Adjustment Expense Reserves
The principal estimation and analysis methods utilized by the Company's actuaries to evaluate management's existing estimates for prior accident periods are the paid loss development method, the case incurred development method, the Bornhuetter-Ferguson (BF) method, and average value analysis combined with the reported claim development method. The BF method is usually utilized for more recent accident periods, with a transition to other methods as the underlying claim data becomes more voluminous and therefore more credible. These estimation and analysis methods are typically referred to as conventional actuarial methods. (See note 8 of the notes to the consolidated financial statements for an explanation of these methods).
While the Company utilizes these conventional actuarial methods to estimate the claims liability for its various businesses, Company actuaries evaluating a particular component for a product line may select from the full range of methods developed within the casualty actuarial profession. The Company's actuaries are also regularly monitoring developments within the profession for advances in existing techniques or the creation of new techniques that might improve current and future estimates.
Some components of a product line may be susceptible to infrequent large claims or not be subject to conventional methods. In such cases, the Company's actuarial analysis will isolate such components for review. The reserves excluding such large claims are generally analyzed using the conventional methods described above. 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. (This monitoring may lead to supplemental adjustments to the aggregate of such claim estimates).
•Utilizing historic longer-term average ratios of large claims to small claims, and applying such ratios to the estimated ultimate small claims from conventional analysis.
•Ground-up analysis of the underlying exposure (typically used for asbestos and environmental).
The results of such methodologies are subjected to various reasonability and diagnostic tests, including implied incurred-loss-to-earned-premium ratios, non-zero claim severity trends and paid-to-incurred loss ratios. An actual versus expected analysis is also performed comparing actual loss development to expected development embedded within management's estimate. Additional analyses may be performed based on the results of these diagnostics, including the investigation of other actuarial methods.
The methods described above are generally utilized to evaluate management's estimate for prior accident periods. For the initial estimate of the current accident year, however, the available claim data is typically insufficient to produce a reliable indication. As a result, the initial estimate for an accident year is generally based on an exposure-based method using either the loss ratio projection method or the expected loss method. The loss ratio projection method, which is typically used for guaranteed-cost business, develops an initial estimate for an accident year by multiplying earned premiums for the accident year by a projected loss ratio. The projected loss ratio is determined by analyzing prior period experience, and adjusting for loss cost trends, rate level differences, mix of business changes and other known or observed factors influencing the current accident year relative to prior accident years. 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.
Management's Estimates
At least once per quarter, members of Company management meet with the Company's actuaries to review the latest claims and claim adjustment expense reserve analyses. Based on these analyses, management determines whether its ultimate claim liability estimates should be changed from the prior period. In doing so, it must evaluate whether the new data provided represents credible actionable information or an anomaly that will have no effect on estimated ultimate claim liability. For example, as described above, payments may have decreased in one geographic region due to fewer claim adjusters being available to process claims. The resulting claim payment patterns would be analyzed to determine whether or not the change in payment pattern represents a change in ultimate claim liability.
This type of assessment requires considerable judgment. It is frequently not possible to determine whether a change in the data is an anomaly until sometime after the event. Even if a change is determined to be permanent, it is not always possible to
reliably determine the extent of the change until sometime later. The overall detailed analyses supporting such an effort can take several months to perform as the underlying causes of the trends observed need to be evaluated, which may require the gathering or assembling of data not previously available. It may also include interviews with experts involved with the underlying processes. As a result, there can be a time lag between the emergence of a change and a determination that the change should be reflected in the Company's estimated claim liabilities. The final estimate selected by management in a reporting period is based on these various detailed analyses of past data, adjusted to reflect any new actionable information.
The Audit Committee of the Board of Directors reviews the process by which the Company establishes reserves for the purpose of the Company's financial statements.
Discussion of Product Lines
The following section details reserving considerations and common risk factors by product line. There are many additional risk factors that may impact ultimate claim costs. Each risk factor presented will have a different impact on required reserves. Also, risk factors can have offsetting or compounding effects on required reserves. For example, in workers' compensation, the use of expensive medical procedures that result in medical cost inflation may enable workers to return to work faster, thereby lowering indemnity costs. 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. This information is provided for both the Company and the industry for the nine most recent years, and is based on the most recent publicly available data for the reported line(s) that most closely match the individual product line being discussed. These changes were calculated, net of reinsurance, from statutory annual statement data found in Schedule P of those statements, and represent the reported reserve development on the beginning-of-the-year claim liabilities divided by the beginning claim liabilities, all accident years combined, excluding non-defense related claim adjustment expense. Data presented for the Company includes history for the entire Travelers group (U.S. companies only), as required by the statutory reporting instructions promulgated by state regulatory authorities for Schedule P. Comparable data for non-U.S. companies is not available.
General Liability
General liability is generally considered a long tail line, as it takes a relatively long period of time to finalize and settle claims from a given accident year. The speed of claim reporting and claim settlement is a function of the characteristics of claims, including specific coverage provided, the jurisdiction and specific policy provisions such as self-insured retentions, among others. There are numerous components underlying the general liability product line. Some of these have relatively moderate payment patterns (with most of the claims for a given accident year closed within five to seven years), while others can have extreme lags in both reporting and payment of claims (e.g., a reporting lag of a decade or more for "construction defect" claims).
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. Bodily injury liability payments reimburse the claimant for damages pertaining to physical injury as a result of the policyholder's legal obligation arising from non-intentional acts such as negligence, subject to the insurance policy provisions. In some cases the damages can include future wage loss (which is a function of future earnings power and wage inflation) and future medical treatment costs. Property damage liability payments result from damages to the claimant's private property arising from the policyholder's legal obligation for non-intentional acts. In most cases, property damage losses are a function of costs as of the loss date, or soon thereafter.
In addition, sizable or unique exposures are reviewed separately. These exposures include asbestos, environmental, other mass torts, construction defect and large unique accounts that would otherwise distort the analysis. These unique categories often require a very high degree of judgment and require reserve analyses that do not rely on conventional actuarial methods.
Defense costs are also a part of the insured costs covered by liability policies and can be significant, sometimes greater than the cost of the actual paid claims. For some products this risk is mitigated by policy language such that the insured portion of defense costs is included in the policy limit available to pay the claim. Such "defense within the limits" policies are most common for "claims-made" products. When defense costs are outside of the policy limits, the full amount of the policy limit is available to pay claims and the amounts paid for defense costs have no contractual limit.
This line is typically the largest source of reserve estimate uncertainty in the United States (excluding assumed reinsurance contracts covering the same risk). Major contributors to this reserve estimate uncertainty include the reporting lag (i.e., the length of time between the event triggering coverage and the actual reporting of the claim), the number of parties involved in the underlying tort action, whether the "event" triggering coverage is confined to only one time period or is spread over multiple time periods, the potential dollars involved (in the individual claim actions), whether such claims were reasonably foreseeable and intended to be covered at the time the contracts were written (i.e., coverage dispute potential), and the potential for mass claim actions. Claims with longer reporting lags result in greater estimation uncertainty. This is especially true for alleged claims with a latency feature, particularly where courts have ruled that coverage is spread over multiple policy years, hence involving multiple defendants (and their insurers and reinsurers) and multiple policies (thereby increasing the potential dollars involved and the underlying settlement complexity). Claims with long latencies also increase the potential recognition lag (i.e., the lag between writing a type of policy in a certain market and the recognition that such policies have potential mass tort and/or latent claim exposure).
The amount of reserve estimate uncertainty also varies significantly by component for the general liability product line. The components in this product line with the longest latency, longest reporting lags, largest potential dollars involved and greatest claim settlement complexity are asbestos and environmental. Components that include latency, reporting lag and/or complexity issues, but to a materially lesser extent than asbestos and environmental, include construction defect and other mass tort actions. 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. In general, components with shorter reporting lags, fewer parties involved in settlement negotiations, only one policy potentially triggered per claim, fewer potential settlement dollars, reasonably foreseeable (and stable) potential hazards/claims and no mass tort potential result in much less reserve estimate uncertainty than components without those characteristics.
In addition to the conventional actuarial methods mentioned in the general discussion section, the company utilizes various report year development methods for the construction defect components of this product line. The Construction Defect report year development analysis is supplemented with projected claim counts and average values for IBNR claim counts. For components with greater lags in claim reporting, such as excess and umbrella components of this product line, the Company relies more heavily on the BF method than on the paid and case incurred development methods.
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. 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), 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.
Historically, the one-year change in the reserve estimate for this product line, excluding estimated asbestos amounts, over the last nine years has varied from -4% to 6% (averaging 2%) for the Company, and from -2% to 3% (averaging 1%) for the industry overall. 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) represent approximately 26% of the Company's total claims and claim adjustment expense reserves.
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 reserves, the extension of the statute of limitations for childhood sexual molestation claims and increases in reserves in the Company's runoff operations, was 2% for 2025, 4% for 2024 and 4% for 2023. The 2025 change primarily reflected higher than expected loss experience in Business Insurance for accident years 2022 and 2023. The 2024 change primarily reflected higher than expected loss experience in Business Insurance for accident years 2021 through 2023. The 2023 change primarily reflected higher than expected loss experience in Business Insurance for accident years 2017 through 2020.
Commercial Property
Commercial property is generally considered a short tail line with a simpler and faster claim reporting and adjustment process than liability coverages, and less uncertainty in the reserve setting process (except for more complex business interruption claims). It is generally viewed as a moderate frequency, low to moderate severity line, except for catastrophes and coverage related to large properties. The claim reporting and settlement process for property coverage claim reserves is generally restricted to the insured and the insurer. Overall, the claim liabilities for this line create a low estimation risk, except possibly for catastrophes and business interruption claims.
Commercial property reserves are typically analyzed in two components, one for catastrophic or other large single events, and another for all other events. 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. As an indicator of the causal effect that a change in one or more risk factors could have on reserves for property, 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 -11% to 2% (averaging -7%) for the Company, and from -12% to -2% (averaging -7%) for the industry overall. 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. Commercial property reserves represent approximately 3% of the Company's total claims and claim adjustment expense reserves.
Since commercial property is considered a short tail coverage, the one year change for commercial property can be more volatile than that for the longer tail product lines. This is due to the fact that the majority of the reserve for commercial property
relates to the most recent accident year, which is subject to the most uncertainty for all product lines. This recent accident year uncertainty is relevant to commercial property because weather-related events that occur in the second half of the year may not be completely resolved until the following year. Reserve estimates associated with catastrophes may take even longer to resolve. The reserve estimates for this product line are also potentially subject to material changes due to uncertainty in measuring ultimate losses for significant catastrophes such as hurricanes, tornadoes, hail storms and wildfires.
The Company's change in reserve estimate for this product line was -8% for 2025, -3% for 2024 and 2% for 2023. The 2025 change primarily reflected better than expected loss experience related to both catastrophe and non-catastrophe losses for accident years 2022 through 2024. The 2024 change primarily reflected better than expected loss experience related to both catastrophe and non-catastrophe losses for accident years 2018 through 2020 and 2023. The 2023 change primarily reflected higher than expected loss experience related to both catastrophe and non-catastrophe losses for accident year 2022.
Commercial Multi-Peril
Commercial multi-peril provides a combination of property and liability coverage typically for small businesses and, therefore, includes both short and long tail coverages. For property coverage, it generally takes a relatively short period of time to close claims, while for the other coverages, generally for the liability coverages, it takes a longer period of time to close claims.
The reserving risk for this line is dominated by the liability coverage portion of this product, except occasionally in the event of catastrophic or other large single loss events. The reserving risk for this line differs from that of the general liability product line and the property product line due to the nature of the customer. Commercial multi-peril is generally sold to small- to mid-sized accounts, while the customer profile for general liability and commercial property includes larger customers.
See "Commercial property risk factors" and "General liability risk factors," discussed above, with regard to reserving risk for commercial multi-peril.
Unanticipated changes in risk factors can affect reserves. As an indicator of the causal effect that a change in one or more risk factors could have on reserves for commercial multi-peril (excluding asbestos), a 1% increase (decrease) in incremental paid loss development for each future calendar year could result in a 1.4% increase (decrease) in claims and claim adjustment expense reserves.
Historically, the one-year change in the reserve estimate for this product line, excluding estimated asbestos amounts, over the last nine years has varied from -5% to 4% (averaging 0%) for the Company, and from -3% to 3% (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. 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 multi-peril reserves (excluding asbestos reserves) represent approximately 11% of the Company's total claims and claim adjustment expense reserves.
As discussed above, this line combines general liability and commercial property coverages and it has been impacted in the past by many of the same events as those two lines.
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 reserves and increases in reserves in the Company's runoff operations, was -2% for 2025, 1% for 2024 and 0% for 2023. The 2025 change primarily reflected better than expected loss experience for property coverages for accident years 2023 and 2024. The 2024 change primarily reflected higher than expected loss experience for liability coverages for accident years 2021 through 2023. In 2023, higher than expected loss experience for liability coverages for accident year 2022 was mostly offset by better than expected loss experience for liability coverages for accident years 2017 and 2020.
Commercial Automobile
The commercial automobile product line is a mix of property and liability coverages and, therefore, includes both short and long tail coverages. The payments that are made quickly typically pertain to auto physical damage (property) claims and property damage (liability) claims. The payments that take longer to finalize and are more difficult to estimate relate to bodily injury claims. In general, claim reporting lags are generally short, claim complexity is not a major issue, and the line is viewed as high frequency, low to moderate severity. Overall, the claim liabilities for this line create a moderate estimation risk. Recently, the Company has seen more of an increase in the rate of attorney involvement than it had anticipated and a lengthening of the claim development pattern. As a consequence, the Company has experienced a higher level of bodily injury severity than it had anticipated.
Commercial automobile reserves are typically analyzed in four components: bodily injury liability; property damage liability; collision claims; and comprehensive claims. These last two components have minimum reserve risk and fast payouts and, accordingly, separate risk factors are not presented.
The Company utilizes the conventional actuarial methods mentioned in the general discussion above in estimating claim liabilities for this line. This is supplemented with detailed custom analyses where needed.
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. As an indicator of the causal effect that a change in one or more risk factors could have on reserves for commercial automobile, a 1% increase (decrease) in incremental paid loss development for each future calendar year could result in a 1.4% 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 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. 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 10% 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 2025, 0% for 2024 and 4% for 2023. In 2025, better than expected loss experience for physical damage coverages for accident year 2024 was largely offset by higher than expected loss experience for liability coverages for accident years 2022 and 2023. In 2024, better than expected loss experience for physical damage coverages for accident year 2023 was largely offset by higher than expected loss experience for liability coverages for accident years 2021 through 2023. The 2023 change primarily reflected higher than expected loss experience for liability coverages for accident years 2021 and 2022.
Workers' Compensation
Workers' compensation is generally considered a long tail coverage, as it takes a relatively long period of time to finalize claims from a given accident year. While certain payments such as initial medical treatment or temporary wage replacement for the injured worker are made quickly, some other payments are made over the course of several years, such as awards for permanent partial injuries. In addition, some payments can run as long as the injured worker's life, such as permanent disability benefits and on-going medical care. Despite the possibility of long payment tails, the reporting lags are generally short, payment obligations are generally not complex, and most of the liability can be considered high frequency with moderate severity. The largest reserve risk generally comes from the low frequency, high severity claims providing lifetime coverage for medical expense arising from a worker's injury, as such claims are subject to greater inflation risk. Overall, the claim liabilities for this line create a somewhat greater than moderate estimation risk.
Workers' compensation reserves are typically analyzed in three components: indemnity losses, medical losses and claim adjustment expenses.
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. 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 -5% to -3% (averaging -4%) for the Company, and from -5% to -2% (averaging -4%) for the industry overall. 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. Workers' compensation reserves represent approximately 28% 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 2025, -5% for 2024 and -5% for 2023. The 2025 change primarily reflected better than expected loss experience for accident years 2022 and prior. The 2024 change primarily reflected better than expected loss experience for accident years 2022 and prior. The 2023 change primarily reflected better than expected loss experience for accident years 2021 and prior.
Fidelity and Surety
Fidelity is generally considered a short tail coverage. It takes a relatively short period of time to finalize and settle most fidelity claims. The volatility of fidelity reserves is generally related to the type of business of the insured, the size and complexity of the insured's business operations, amount of policy limit and attachment point of coverage. The uncertainty surrounding reserves for small, commercial insureds is typically less than the uncertainty for large commercial or financial institutions. The high frequency, low severity nature of small commercial fidelity losses provides for stability in loss estimates, whereas the low frequency, high severity nature of losses for large insureds results in a wider range of ultimate loss outcomes. Actuarial techniques that rely on a stable pattern of loss development are generally not applicable to low frequency, high severity claims.
Surety has certain components that are generally considered short tail coverages with short reporting lags, although large individual construction and commercial surety contracts can result in a long settlement tail, based on the length and complexity of the construction project(s) or commercial transaction being bonded. The frequency of losses in surety generally has a lagging correlation with economic cycles as the primary cause of surety loss is the inability of an insured to fulfill its contractual obligations. The Company actively seeks to mitigate this exposure to loss through disciplined risk selection, adherence to underwriting standards and ongoing monitoring of contractor progress in significant construction projects. The volatility of surety losses is generally related to the type of business performed by the bonded party, the type of bonded obligation, the amount of limit exposed to loss and the amount of assets available to the surety company to mitigate losses, such as unbilled contract funds, collateral, first and third party indemnity, and other security positions of a bonded party's assets. Certain classes of surety claims are very high severity, low frequency in nature. These can include large construction contractors involved with one or multiple large, complex projects as well as certain large commercial surety exposures. Other claim factors affecting reserve variability of surety include litigation related to amounts owed by the bonded party and due to the surety company (e.g., salvage and subrogation efforts), the results of financial restructuring of a bonded party and the availability and cost of replacement contractors, labor and materials.
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. As an indicator of the causal effect that a change in one or more risk factors could have on reserves for fidelity and surety, a 1% increase (decrease) in incremental paid loss development for each future calendar year could result in a 1.8% 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 -30% to -10% (averaging -18%) for the Company, and from -21% to 0% (averaging -13%) for the industry overall. 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. Fidelity and surety reserves represent approximately 1% of the Company's total claims and claim adjustment expense reserves.
In general, developments on single large claims (both adverse and favorable) are a primary source of changes in reserve estimates for this product line.
The Company's change in reserve estimate for this product line was -23% for 2025, -14% for 2024 and -26% for 2023. The 2025 change primarily reflected better than expected loss experience in the fidelity and surety product line for accident year 2024. The 2024 change primarily reflected better than expected loss experience in the fidelity and surety product line for accident year 2022. The 2023 change primarily reflected better than expected loss experience in the fidelity and surety product line for accident years 2021 and 2022.
Personal Automobile
Personal automobile includes both short and long tail coverages. The payments that are made quickly typically pertain to auto physical damage (property) claims and property damage (liability) claims. The payments that take longer to finalize and are more difficult to estimate relate to bodily injury claims. Reporting lags are relatively short and the claim settlement process for personal automobile liability generally is the least complex of the liability products. It is generally viewed as a high frequency, low to moderate severity product line. Overall, the claim liabilities for this line create a moderate estimation risk.
Personal automobile reserves are typically analyzed in five components: bodily injury liability, property damage liability, no-fault losses, collision claims and comprehensive claims. These last two components have minimum reserve risk and fast payouts and, accordingly, separate factors are not presented.
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. As an indicator of the causal effect that a change in one or more risk factors could have on reserves for personal automobile, 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 -8% to 0% (averaging -3%) 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. The Company believes that its range of historical outcomes is illustrative of reasonably possible one-year changes in reserve estimates for this product line. Personal automobile reserves represent approximately 7% of the Company's total claims and claim adjustment expense reserves.
The Company's change in reserve estimate for this product line was -8% for 2025, -5% for 2024 and 0% for 2023. The 2025 change primarily reflected better than expected loss experience for liability coverages for accident years 2023 and 2024 and for physical damage coverages for accident year 2024. The 2024 change primarily reflected better than expected loss experience for liability coverages for accident years 2020 through 2023 and for physical damage coverages for accident year 2023. In 2023, better than expected loss experience for physical damage coverages for accident years 2021 and 2022 was largely offset by higher than expected loss experience for liability coverages for accident years 2020 and 2021.
Personal Homeowners and Other
Homeowners is generally considered a short tail coverage. Most payments are related to the property portion of the policy, where the claim reporting and settlement process is generally restricted to the insured and the insurer. Claims on property coverage are typically reported soon after the actual damage occurs, although delays of several months are not unusual. The resulting settlement process is typically fairly short term, although exceptions do exist.
The liability portion of the homeowners policy generates claims which take longer to pay due to the involvement of litigation and negotiation, but with generally small reporting lags. Personal Insurance Other products include personal umbrella policies, among others. See "general liability reserving risk factors," discussed above, for reserving risk factors related to umbrella coverages.
Overall, the line is generally high frequency, low to moderate severity (except for catastrophes), with simple to moderate claim complexity.
Homeowners reserves are typically analyzed in two components: non-catastrophe related losses and catastrophe losses.
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. As an indicator of the causal effect that a change in one or more risk factors could have on reserves for personal homeowners and other, 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 (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 1% (averaging -8%) for the Company, and from -3% to 2% (averaging -1%) for the industry overall. 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. Personal homeowners and other reserves represent approximately 5% of the Company's total claims and claim adjustment expense reserves.
This line combines both liability and property coverages; however, the majority of the reserves relate to property. While property is considered a short tail coverage, the one year change for property can be more volatile than that for the longer tail product lines. This is due to the fact that the majority of the reserve for property relates to the most recent accident year, which is subject to the most uncertainty for all product lines. This recent accident year uncertainty is relevant to property because weather-related events in the second half of the year may not be completely resolved until the following year. Reserve estimates associated with catastrophes, including wildfires in recent years, may take even longer to resolve.
The Company's change in reserve estimate for this product line (excluding Personal Insurance Other) was -8% for 2025, -12% for 2024 and -9% for 2023. The 2025 change primarily reflected better than expected loss experience for catastrophe and non-catastrophe losses for accident year 2024. The 2024 change primarily reflected better than expected loss experience for catastrophe and non-catastrophe losses for accident years 2017 through 2023. The 2023 change primarily reflected better than expected loss experience for catastrophe and non-catastrophe losses for accident years 2017 through 2022.
International and Other
International and other includes products written by the Company's international operations, as well as all other products not explicitly discussed above. The principal component of "other" claim reserves is assumed reinsurance written on an excess-of-loss basis, which may include reinsurance of non-U.S. exposures, and is runoff business.
International and other claim liabilities result from a mix of coverages, currencies and jurisdictions/countries. The common characteristic is the need to customize the analysis to the individual component, and the inability to rely on data characterizations and reporting requirements in the U.S. statutory reporting framework.
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., the Republic of Ireland, the United Kingdom and Canada), 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). The speed of claim reporting and claim settlement is a function of the specific coverage provided, the jurisdiction, the distribution system (e.g., underwriting pool versus direct) and the proximity of the insurance sale to the insured hazard (e.g., insured and insurer located in different countries). In particular, liabilities arising from the underwriting pools in runoff may result in significant reporting lags, settlement lags and claim complexity, due to the need to coordinate with other pool members or co-insurers through a broker or lead-insurer for claim settlement purposes.
International reserves are generally analyzed by country and general coverage category (e.g., Commercial Property in the United Kingdom, General Liability in Canada, etc.). The business is also generally split by direct versus assumed reinsurance for a given coverage. Where the underlying insured hazard is outside the United States, the underlying coverages are generally similar to those described under the Homeowners, Personal Automobile, Commercial Automobile, General Liability, Commercial Property and Surety discussions above, taking into account differences in the legal environment and differences in terms and conditions. However, statutory coverage differences exist amongst various jurisdictions. For example, in some jurisdictions there are no aggregate policy limits on certain liability coverages.
Other reserves, primarily assumed reinsurance in runoff, are generally analyzed by program/pool, treaty type, and general coverage category (e.g., General Liability - excess of loss reinsurance). Excess exposure requires the insured to "prove" not only claims under the policy, but also the prior payment of claims reaching up to the excess policy's attachment point.
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. As an indicator of the causal effect that a change in one or more risk factors could have on reserves for International and other (excluding asbestos), a 1% increase (decrease) in incremental paid loss development for each future calendar year could result in a 1.4% increase (decrease) in claims and claim adjustment expense reserves. International and other reserves (excluding asbestos) represent approximately 9% 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. Comparative historical information is not available for international product lines as insurers domiciled outside of the United States do not file U.S. statutory reports. Comparative historical information on runoff business is not indicative of reasonably possible one-year changes in the reserve estimate for this mix of runoff business. Accordingly, the Company has not included comparative analyses for International and other.
Reinsurance Recoverables
Amounts recoverable from reinsurers are estimated in a manner consistent with the associated claim liability. 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. In addition, in the ordinary course of business, the Company becomes involved in coverage disputes with its reinsurers. Some of these disputes could result in lawsuits and arbitrations brought by or against the reinsurers to determine the Company's rights and obligations under the various reinsurance agreements. The Company employs dedicated specialists and comprehensive strategies to manage reinsurance collections and disputes.
The Company has entered into a reinsurance contract in connection with catastrophe bonds issued by Long Point Re IV. This contract meets the requirements to be accounted for as reinsurance in accordance with guidance for accounting for reinsurance contracts. The catastrophe bonds are described in more detail in "Item 1-Business-Catastrophe Reinsurance."
Recoverables attributable to structured settlements relate primarily to personal injury claims, of which workers' compensation claims comprise a significant portion, for which the Company has purchased annuities and remains contingently liable in the event of a default by the companies issuing the annuities. Recoverables attributable to mandatory pools and associations relate primarily to workers' compensation service business. These recoverables are supported by the participating insurance companies' obligation to pay a pro rata share based on each company's voluntary market share of written premium in each state in which it is a pool participant. In the event a member of a mandatory pool or association defaults on its share of the pool's or association's obligations, the other members' share of such obligation increases proportionally.
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.
Impairments
Investment Impairments
See note 1 of the notes to the consolidated financial statements for a discussion of investment impairments.
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. Additionally, it is possible that the issuer's actual ability to meet contractual obligations may be different than what the Company determined during its analysis, which may lead to a different impairment conclusion in future periods.
Goodwill and Other Intangible Assets Impairments
The Company performs a review, on at least an annual basis, of goodwill held by the reporting units which are the Company's three operating and reportable segments: Business Insurance; Bond & Specialty Insurance; and Personal Insurance. The Company uses a discounted cash flow model to estimate the fair value of its reporting units that incorporates multiple inputs into discounted cash flow calculations, including assumptions that market participants may make in valuing the reporting unit. The discounted cash flow model is an income approach to valuation that is based on a detailed cash flow analysis for deriving a current fair value of reporting units and is representative of the Company's reporting units' current and expected future financial performance. The assumptions used include earnings projections, including projected growth, projected levels of economic capital needed to support the business, and the weighted average cost of capital used for purposes of discounting the projected cash flows. 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. Once the Company estimates the fair value of its reporting units, those estimates are compared to their carrying values. If the carrying values of the reporting units were to exceed their fair value, the amount of the impairment would be calculated, and goodwill adjusted accordingly.
Other indefinite-lived intangible assets held by the Company are also reviewed for impairment on at least an annual basis. The Company uses various methods for estimating the fair value of the intangible assets and relies on inputs such as replacement cost, projected earnings, including projected growth of earnings, and market royalty rates applied to the projected earnings.
See note 1 of the notes to the consolidated financial statements for a discussion of impairments of goodwill and other intangible assets.
OTHER UNCERTAINTIES
For a discussion of other risks and uncertainties that could impact the Company's results of operations or financial position, see note 17 of the notes to the consolidated financial statements and "Item 1A-Risk Factors."
FORWARD-LOOKING STATEMENTS
This report contains, and management may make, certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Words such as "may," "will," "should," "likely," "probably," "anticipates," "expects," "intends," "plans," "projects," "believes," "views," "ensures," "estimates" and similar expressions are used to identify these forward-looking statements. These statements include, among other things, the Company's statements about:
•the Company's outlook, the impact of trends on its business and its future results of operations and financial condition (including, among other things, anticipated premium volume, premium rates, renewal premium changes, underwriting margins and underlying underwriting margins, net and core income, investment income and performance, loss costs, return on equity, core return on equity and expected current returns, and combined ratios and underlying combined ratios);
•the impact of legislative or regulatory actions or court decisions;
•share repurchase plans;
•future pension plan contributions;
•the sufficiency of the Company's reserves, including asbestos;
•the impact of emerging claims issues as well as other insurance and non-insurance litigation;
•the cost and availability of reinsurance coverage;
•catastrophe losses and modeling, including statements about probabilities or likelihood of exceedance;
•the impact of investment (including changes in interest rates), economic (including inflation, the impact of tariffs, changes in tax laws, changes in commodity prices and fluctuations in foreign currency exchange rates) and underwriting market conditions;
•the Company's approach to managing its investment portfolio;
•the impact of changing climate conditions;
•strategic and operational initiatives to improve growth, profitability and competitiveness;
•the Company's competitive advantages and innovation agenda, including executing on that agenda with respect to artificial intelligence;
•the Company's cybersecurity policies and practices;
•new product offerings;
•the impact of developments in the tort environment, such as increased attorney involvement in insurance claims; and
•the impact of developments in the geopolitical environment.
The Company cautions investors that such statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond the Company's control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
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.
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