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Travelers Reports Fourth Quarter Net Income of $304 Million or $0.78 per Diluted Share After Catastrophe Losses of $689 Million

  Travelers Reports Fourth Quarter Net Income of $304 Million or $0.78 per
  Diluted Share After Catastrophe Losses of $689 Million After-tax, Including
  Storm Sandy, or $1.78 Per Diluted Share

Full Year Net Income of $2.5 Billion and Return on Equity and Operating Return
                  on Equity of 9.8% and 11.0%, Respectively

Business Wire

NEW YORK -- January 22, 2013

The Travelers Companies, Inc. (NYSE: TRV):

  *Fourth quarter operating income of $278 million or $0.72 per diluted
    share.
  *Substantial improvement in underlying underwriting margin.
  *Strong net investment income attributable to alternative investment
    returns.
  *Written rate gains strong in all segments, with renewal rate change of
    approximately 8% in Business Insurance.
  *Book value per share of $67.31, up 8% from year-end 2011.
  *Repurchased 5.4 million shares for $400 million in the quarter and 22.4
    million shares for $1.450 billion in the full year.
  *Board of Directors approved quarterly dividend per share of $0.46.

The Travelers Companies, Inc. today reported net income of $304 million, or
$0.78 per diluted share, for the quarter ended December 31, 2012, compared to
$618 million, or $1.51 per diluted share, in the prior year quarter. Operating
income in the current quarter was $278 million, or $0.72 per diluted share,
compared to $609 million, or $1.48 per diluted share, in the prior year
quarter. The decrease in net and operating income in the current quarter
compared to the prior year quarter resulted from the after-tax impact of
higher catastrophe losses, partially offset by higher underlying underwriting
margins and higher net favorable prior year reserve development. Catastrophe
losses in the current quarter were $689 million after-tax ($1.054 billion
pre-tax), including losses resulting from Storm Sandy of $669 million
after-tax ($1.024 billion pre-tax), compared to $68 million after-tax ($102
million pre-tax) in the prior year quarter.

                           Consolidated Highlights


($ in
millions,
except for
per share
amounts,     Three Months Ended December          Twelve Months Ended December 31,
and           31,
after-tax,
except for
premiums &
revenues)
              2012       2011       Change         2012        2011        Change
                                                                                      
Net written   $ 5,385     $ 5,261     2      %       $ 22,447     $ 22,187     1      %
premiums
                                                                
                                                                                      
Total         $ 6,477     $ 6,373     2              $ 25,740     $ 25,446     1
revenues
                                                                                      
Operating     $ 278       $ 609       (54  )         $ 2,441      $ 1,390      76
income
per diluted   $ 0.72      $ 1.48      (51  )         $ 6.21       $ 3.28       89
share
                                                                                      
Net income    $ 304       $ 618       (51  )         $ 2,473      $ 1,426      73
per diluted   $ 0.78      $ 1.51      (48  )         $ 6.30       $ 3.36       88
share
                                                                                      
Diluted
weighted
average         385.3       407.0     (5   )           389.8        420.5      (7   )
shares
outstanding
                                                                                      
GAAP
combined        105.4 %     95.9  %   9.5    pts       97.1   %     105.1  %   (8.0 ) pts
ratio
                                                                                      
Operating
return on       5.0   %     11.1  %   (6.1 ) pts       11.0   %     6.1    %   4.9    pts
equity
Return on       4.7   %     10.0  %   (5.3 ) pts       9.8    %     5.7    %   4.1    pts
equity
                                                                                      
                                                     As of December 31,
                                                     2012         2011         Change
Book value                                           $ 67.31      $ 62.32      8      %
per share
Adjusted
book value                                           $ 59.09      $ 55.01      7
per share
See Glossary of Financial Measures for definitions and the statistical supplement for
additional financial data.


“We are pleased with our fourth quarter results, as well as our full year
results, particularly in light of Storm Sandy,” commented Jay Fishman,
Chairman and Chief Executive Officer. “Our full year operating income was $2.4
billion, which included $1.2 billion in after-tax catastrophe losses, compared
to operating income of $1.4 billion in the prior year, which included $1.7
billion in after-tax catastrophe losses. In addition to the lower level of
catastrophe losses, higher underlying underwriting margins contributed
significantly to the year over year improvement. The underlying underwriting
margins improved in each of our businesses, attributable to improved
non-catastrophe weather-related losses and the significant pricing gains we
have been realizing. Our high quality investment portfolio continued to
perform very well. Finally, in light of the overall economic environment, we
remained highly disciplined in managing our expenses but continue to invest
strategically in our businesses where appropriate.

“We are very encouraged by pricing trends across all three business segments.
Renewal rate change in Business Insurance was approximately 8%, up from nearly
6% in the fourth quarter of last year and consistent with recent quarters.
Renewal rate change in Financial, Professional and International Insurance
improved to 4%, and we once again achieved double-digit pricing improvements
in Personal Insurance.

“Given the continued low interest rate environment and uncertain weather
patterns, we will continue to seek improved pricing. In addition, we remain
committed to returning excess capital to shareholders, and in that regard we
are especially pleased that notwithstanding the high level of catastrophe
losses we again experienced in 2012, we were able to return more than $2.1
billion to shareholders through dividends and share repurchases.

“This was another year in which unusual severe weather events affected many of
our customers, and we remain committed to delivering on our promise of helping
them restore their lives. Our entire Claim organization has again been called
upon to work under difficult circumstances and has responded with their
customary care and professionalism. We are deeply appreciative for all that
they have done over these difficult months to make sure Travelers does it
right,” concluded Fishman.

                   Fourth Quarter 2012 Consolidated Results


                                                                
($ in millions)         Three Months Ended December 31,
                        2012             2011           2012         2011
                       Pre-tax                         After-tax
                                                                             
Underwriting gain       $ (338   )       $ 187          $ (232 )     $ 115
(loss)
Underwriting gain
(loss) includes:
Net favorable prior
year reserve              222              126            146          83
development
Catastrophes, net of      (1,054 )         (102 )         (689 )       (68 )
reinsurance
                                                                             
Net investment income     689              652            556          541
                                                                             
Other, including         (79    )        (75  )        (46  )      (47 )
interest expense
Operating income          272              764            278          609
Net realized             39             14           26         9   
investment gains
Income before income    $ 311           $ 778  
taxes
Net income                                              $ 304       $ 618 
                                                          
                                                                             
GAAP combined ratio       105.4    %       95.9   %
                                                                             
GAAP combined ratio
excluding incremental     104.6    %       95.1   %
impact of direct to
consumer initiative
                                                                             
Impact on GAAP
combined ratio
Net favorable prior
year reserve              (4.0   ) pts     (2.3 ) pts
development
Catastrophes, net of      18.7     pts     1.8    pts
reinsurance


Operating income of $278 million after-tax decreased $331 million from the
prior year quarter due to a $347 million after-tax decrease in the
underwriting results, reflecting the after-tax impact of higher catastrophe
losses that were partially offset by higher underlying underwriting margins
(which excludes net favorable prior year reserve development and catastrophe
losses) and higher net favorable prior year reserve development.

The underwriting results in the current quarter reflected a GAAP combined
ratio of 105.4 percent, as compared to 95.9 percent in the prior year quarter.
This increase of 9.5 points in the combined ratio resulted from higher
catastrophe losses (16.9 points), partially offset by higher underlying
underwriting margins (5.7 points) and higher net favorable prior year reserve
development (1.7 points). Catastrophe losses in the current quarter were
mostly due to Storm Sandy. Net favorable prior year reserve development in the
current quarter occurred in all three business segments.

The current quarter underlying GAAP combined ratio was 90.7 percent (which
excludes net favorable prior year reserve development and catastrophe losses)
as compared to 96.4 percent in the prior year quarter. This improvement of5.7
points primarily resulted from lower non-weather related property losses in
Personal Insurance and earned rate increases exceeding loss cost trends in all
three business segments.

Total revenues of $6.477 billion in the current quarter increased 2 percent
from the prior year quarter. Within total revenues, net investment income of
$689 million increased $37 million from the prior year quarter due to private
equity performance in the non-fixed income portfolio, partially offset by a
slight reduction in fixed income returns due to lower reinvestment rates.

Net written premiums of $5.385 billion in the current quarter increased 2
percent from the prior year quarter. Renewal rate gains continued across all
segments. Retention rates remained strong across all three business segments
and were generally consistent with recent quarters. New business volumes in
Business Insurance increased slightly from the prior year quarter but
decreased in Financial, Professional & International Insurance and Personal
Insurance. Net written premiums in Business Insurance also benefited from
continued positive exposure change at renewal, as well as a modestly higher
level of positive audit premiums compared to the prior year quarter.

                              Capital Management

“Our cash position remained strong as we ended the year with holding company
liquidity of $2.0 billion,” commented Jay S. Benet, Vice Chairman and Chief
Financial Officer. “Even with the elevated claim payments related to Storm
Sandy and a discretionary contribution of $150 million to our qualified
pension plan to maintain our high funding ratio, operating cash flows were
over $450 million in the quarter. Further, we repurchased 5.4 million shares
for $400 million, and dividends were $178 million during the quarter, bringing
the full year total capital returned to shareholders to more than $2.1
billion.”

During full year 2012, the company repurchased 22.4 million common shares
under its existing share repurchase authorization at a total cost of $1.450
billion, leaving $2.159 billion of capacity under that authorization for
future share repurchases. Shareholders’ equity was $25.405 billion at year-end
2012, a 4 percent increase from the end of the prior year. Included in
shareholders’ equity at year-end 2012 were after-tax net unrealized investment
gains of $3.103 billion, compared to $2.871 billion at year-end 2011.
Statutory surplus was $20.048 billion, a 5 percent increase from the beginning
of the year. The company’s debt-to-capital ratio (excluding after-tax net
unrealized investment gains) was 22.2 percent, well within its target range.

The Board of Directors declared a quarterly dividend of $0.46 per share. This
dividend is payable March 29, 2013, to shareholders of record as of the close
of business on March 8, 2013.

                 Business Insurance Segment Financial Results

“We were pleased with the profitability in Business Insurance, particularly in
light of Storm Sandy,” commented Brian MacLean, President and Chief Operating
Officer. “We were especially pleased that the underlying combined ratio
improved over 4 points from the prior year quarter driven primarily by earned
rate increases which exceeded loss cost trends. Written rate gains were
between 6% and 10% across all lines, led by Workers’ Compensation and
Commercial Auto, with stable retentions and slightly improved new business
levels. Going forward we will continue to execute on our targeted pricing
strategy to further improve underwriting margins.”


                                                                
($ in millions)          Three Months Ended December 31,
                         2012            2011           2012         2011
                         Pre-tax                        After-tax
                                                                             
Underwriting gain        $ (119  )       $ 106          $ (82  )     $ 63
(loss)
Underwriting gain
(loss) includes:
Net favorable prior
year reserve               120             49             78           32
development
Catastrophes, net of       (439  )         (14  )         (285 )       (9  )
reinsurance
                                                                             
Net investment income      498             457            402          379
                                                                             
Other                      9               4              6            3
                                                                  
Operating income         $ 388          $ 567         $ 326       $ 445 
                                                          
                                                                             
GAAP combined ratio        103.5   %       95.8   %
                                                                             
Impact on GAAP
combined ratio
Net favorable prior
year reserve               (4.0  ) pts     (1.7 ) pts
development
Catastrophes, net of       14.7    pts     0.5    pts
reinsurance
                                                             

Operating income of $326 million after-tax decreased $119 million from the
prior year quarter due to a $145 million after-tax decrease in the
underwriting results, reflecting the after-tax impact of higher catastrophe
losses that were partially offset by higher underlying underwriting margins
and higher net favorable prior year reserve development.

The underwriting results in the current quarter reflected a GAAP combined
ratio of 103.5 percent, as compared to 95.8 percent in the prior year quarter.
This increase of 7.7 points in the combined ratio resulted from higher
catastrophe losses (14.2 points), partially offset by higher underlying
underwriting margins (4.2 points) and higher net favorable prior year reserve
development (2.3 points). Net favorable prior year reserve development in the
current quarter primarily resulted from better than expected loss experience
related to 2011 catastrophes as well as lower than expected claim department
expenses.

The current quarter underlying GAAP combined ratio was 92.8 percent, as
compared to 97.0 percent in the prior year quarter. This improvement of4.2
points primarily resulted from earned rate increases exceeding loss cost
trends.

Business Insurance net written premiums of $2.784 billion in the current
quarter increased 6 percent from the prior year quarter primarily driven by
continued increases in renewal rate change. Retention rates remained strong,
and new business volumes increased slightly from the prior year quarter. Net
written premiums also benefited from continued positive exposure change at
renewal, as well as a modestly higher level of positive audit premiums
compared to the prior year quarter.

Select Accounts

  *Net written premiums of $657 million increased 1 percent from the prior
    year quarter primarily due to higher renewal premium change.
  *Renewal premium change was positive and driven by continued strong renewal
    rate change.
  *Retention rates increased from the prior year quarter driven by higher
    retention rates for larger accounts.
  *New business volumes decreased from the prior year quarter.

Commercial Accounts

  *Net written premiums of $718 million increased 8 percent from the prior
    year quarter primarily due to higher renewal premium change.
  *Renewal premium change was positive and driven by continued strong renewal
    rate change.
  *Retention rates remained at a high level and increased from the prior year
    quarter.
  *New business volumes increased significantly from the prior year quarter.

Other Business Insurance

Includes Industry-Focused Underwriting, Target Risk Underwriting and
Specialized Distribution

  *Net written premiums of $1.166 billion increased 6 percent from the prior
    year quarter primarily due to higher renewal premium change.
  *Renewal premium change was positive and driven by continued strong renewal
    rate change.
  *Retention rates remained at a high level and increased from the prior year
    quarter.
  *New business volumes decreased slightly from the prior year quarter.

National Accounts

  *Net written premiums of $244 million increased 18 percent from the prior
    year quarter due to higher new business volumes and increased renewal
    premium change driven by payroll exposure growth, as well as favorable
    prior year audit and retro premium. In addition, growing workers’
    compensation residual market pools contributed to our premium growth.

 Financial, Professional & International Insurance Segment Financial Results

“In Financial, Professional & International Insurance, we continued to see
favorable trends in the underlying combined ratio in both our Management
Liability and International businesses,” commented MacLean. “The underlying
combined ratio improved by 2.6 points quarter over quarter driven by a 4.3
point improvement in the underlying loss ratio. Net written premiums in the
segment increased 2% in the quarter, primarily driven by a 6% increase in net
written premiums in the International business. Written rate in the Management
Liability business improved to almost 8% in the quarter, driving an overall
rate increase of 4% in the segment.”


                                                                
($ in millions)            Three Months Ended December 31,
                           2012           2011           2012        2011
                           Pre-tax                       After-tax
                                                                             
Underwriting gain          $ 88           $ 97           $ 50        $ 63
Underwriting gain
includes:
Net favorable prior year     69             72             46          48
reserve development
Catastrophes, net of         (45  )         (17  )         (34 )       (13 )
reinsurance
                                                                             
Net investment income        95             102            77          85
                                                                             
Other                        5              7              4           4
                                                                  
Operating income           $ 188         $ 206         $ 131      $ 152 
                                                          
                                                                             
GAAP combined ratio          88.3   %       87.3   %
                                                                             
Impact on GAAP combined
ratio
Net favorable prior year     (9.1 ) pts     (9.0 ) pts
reserve development
Catastrophes, net of         5.9    pts     2.2    pts
reinsurance
                                                             

Operating income of $131 million after-tax decreased $21 million from the
prior year quarter mostly due to a $13 million after-tax decrease in the
underwriting gain, reflecting the after-tax impact of higher catastrophe
losses that were partially offset by higher underlying underwriting margins.

The underwriting gain in the current quarter reflected a GAAP combined ratio
of 88.3 percent, as compared to 87.3 percent in the prior year quarter. This
increase of 1.0 point in the combined ratio resulted from higher catastrophe
losses (3.7 points), partially offset by higher underlying underwriting
margins (2.6 points). Also included in the current quarter underwriting gain
was net favorable prior year reserve development which primarily resulted from
better than expected loss experience in the Surety business for accident years
2007-2008 and the Management Liability business for accident year 2007 and
prior within Bond & Financial Products, as well as several lines of business
within International.

The current quarter underlying GAAP combined ratio was 91.5 percent, as
compared to 94.1 percent in the prior year quarter. This improvement of 2.6
points primarily resulted from a lower level of large losses as well as earned
rate increases exceeding loss cost trends, partially offset by an increase in
the expense ratio mostly due to lower earned premiums.

Financial, Professional & International Insurance net written premiums of $808
million increased 2 percent from the prior year quarter primarily driven by
International.

Retention rates, renewal premium changes and new business volumes, as
discussed below, exclude the surety line of business as surety products are
generally sold on a non-recurring, project-specific basis.

Bond & Financial Products

  *Net written premiums of $514 million were approximately the same as the
    prior year quarter as growth in Management Liability was offset by lower
    construction surety production due to the continued low levels of
    government construction spending.
  *Renewal premium change remained positive and continued to increase from
    recent quarters due to positive renewal rate change, partially offset by
    lower insured exposures.
  *Retention rates remained strong and generally consistent with recent
    quarters.
  *New business volumes decreased from the prior year quarter.

International

  *Net written premiums of $294 million increased 6 percent from the prior
    year quarter (4 percent adjusting for the impact of changes in foreign
    exchange rates) primarily due to somewhat lower levels of ceded premium
    and growth in the United Kingdom, partially offset by lower surety
    production in Canada.
  *Renewal premium change was slightly negative due to lower insured
    exposures.
  *Retention rates improved from the prior year quarter.
  *New business volumes increased from the prior year quarter.

                 Personal Insurance Segment Financial Results

“In Personal Insurance, both Auto and Homeowners results were significantly
impacted by catastrophe losses,” commented MacLean. “While we were very
pleased with our Homeowners results given Storm Sandy, we remain concerned
about uncertain weather patterns and we will continue to seek improved
pricing, terms and conditions. In Auto, although we are not yet satisfied with
our results due to continued elevated severity, rate gains are now exceeding
our current view of loss trends and, all other things being the same, we
anticipate improving margins.”


                                                                
($ in millions)          Three Months Ended December 31,
                         2012            2011           2012         2011
                         Pre-tax                        After-tax
                                                                             
Underwriting gain        $ (307  )       $ (16  )       $ (200 )     $ (11 )
(loss)
Underwriting gain
(loss) includes:
Net favorable prior
year reserve               33              5              22           3
development
Catastrophes, net of       (570  )         (71  )         (370 )       (46 )
reinsurance
                                                                             
Net investment income      96              93             77           77
                                                                             
Other                      14              17             9            11
                                                                  
Operating income         $ (197  )       $ 94          $ (114 )     $ 77  
(loss)

                                                                             
GAAP combined ratio        115.2   %       99.8   %
                                                                             
GAAP combined ratio
excluding incremental      113.1   %       97.4   %
impact of direct to
consumer initiative

                                                                             
Impact on GAAP
combined ratio
Net favorable prior
year reserve               (1.8  ) pts     (0.3 ) pts
development
Catastrophes, net of       30.1    pts     3.7    pts
reinsurance
                                                          

After-tax operating results decreased $191 million from the prior year quarter
mostly due to a $189 million after-tax decrease in underwriting results,
reflecting the after-tax impact of higher catastrophe losses that were
partially offset by higher underlying underwriting margins and higher net
favorable prior year reserve development.

The underwriting results in the current quarter reflected a GAAP combined
ratio of 115.2 percent, as compared to 99.8 percent in the prior year quarter.
This increase of 15.4 points in the combined ratio was primarily due to higher
catastrophe losses (26.4 points), partially offset by higher underlying
underwriting margins (9.5 points) and higher net favorable prior year reserve
development (1.5 points). The net favorable prior year reserve development in
the current quarter primarily resulted from better than expected loss
experience in Homeowners & Other attributable to catastrophe and
non-catastrophe losses incurred in 2011 and in the umbrella line of business
for accident years 2008-2011.

The current quarter underlying GAAP combined ratio was 86.9 percent, as
compared to 96.4 percent in the prior year quarter. This improvement of 9.5
points was primarily due to lower non-weather related property losses, lower
non-catastrophe weather-related losses and earned rate increases exceeding
loss cost trends.

Personal Insurance net written premiums of $1.793 billion decreased 3 percent
from the prior year quarter primarily due to lower new business volumes,
largely as a result of the company’s pricing strategy, increasing deductibles
and other profitability improvement initiatives.

Agency Automobile and Agency Homeowners & Other, as discussed below, represent
business sold through agents, brokers and other intermediaries and exclude
direct to consumer.

Agency Automobile

  *Net written premiums of $822 million decreased 6 percent from the prior
    year quarter.
  *Policies in force decreased 9 percent from the prior year quarter.
  *Renewal premium change remained positive and continued to increase from
    recent quarters.
  *Retention rates remained strong and generally consistent with recent
    quarters.
  *New business volumes decreased from the prior year quarter.

Agency Homeowners & Other

  *Net written premiums of $934 million decreased 1 percent from the prior
    year quarter.
  *Policies in force decreased 7 percent from the prior year quarter.
  *Renewal premium change remained positive and continued to increase from
    recent quarters.
  *Retention rates remained very strong and consistent with recent quarters.
  *New business volumes decreased from the prior year quarter.

                Full Year 2012 Consolidated Financial Results


($ in           Twelve Months Ended December 31,
millions)
                 2012            2011            2012          2011
                 Pre-tax                           After-tax
                                                                             
Underwriting     $ 507            $ (1,266 )       $ 296          $ (745   )
gain (loss)
Underwriting
gain (loss)
includes:
Net favorable
prior year         940              715              622            473
reserve
development
Catastrophes,
net of             (1,862 )         (2,562 )         (1,214 )       (1,669 )
reinsurance
Resolution of
prior year tax                                                      100
matters
                                                                             
Net investment     2,889            2,879            2,316          2,330
income
                                                                             
Other,
including          (281   )         (316   )         (171   )       (195   )
interest
expense
Other also
includes:
Resolution of
prior year tax                                                      4
matters
                                                               
Operating          3,115            1,297            2,441          1,390
income
Net realized
investment        51             55             32           36     
gains
Income before    $ 3,166         $ 1,352  
income taxes
Net income                                         $ 2,473       $ 1,426  
                                                                 
                                                                             
GAAP combined      97.1     %       105.1    %
ratio
                                                                             
GAAP combined
ratio
excluding
incremental       96.3     %       104.2    %
impact of
direct to
consumer
initiative
                                                                             
Impact on GAAP
combined ratio
Net favorable
prior year         (4.2   ) pts     (3.2   ) pts
reserve
development
Catastrophes,
net of             8.3      pts     11.6     pts
reinsurance


Operating income of $2.441 billion after-tax increased $1.051 billion from the
prior year mostly due to a $1.041 billion after-tax improvement in
underwriting results, reflecting the after-tax impact of lower catastrophe
losses, higher underlying underwriting margins and higher net favorable prior
year reserve development.

The underwriting gain in the current year reflected a GAAP combined ratio of
97.1 percent, as compared to 105.1 percent in the prior year period. This
improvement of 8.0 points in the combined ratio was due to higher underlying
underwriting margins (3.7 points), lower catastrophe losses (3.3 points) and
higher net favorable prior year reserve development (1.0 point).

The current year underlying GAAP combined ratio was 93.0 percent, as compared
to 96.7 percent in the prior year period. This improvement of3.7 points
primarily resulted from lower non-catastrophe weather-related losses as well
as earned rate increases exceeding loss cost trends.

Financial Supplement and Conference Call
The information in this press release should be read in conjunction with a
financial supplement that is available on our website at www.travelers.com.
Travelers management will discuss the contents of this release and other
relevant topics via webcast at 9 a.m. Eastern (8 a.m. Central) on Tuesday,
January 22, 2013. Prior to the webcast, a slide presentation pertaining to the
quarterly earnings will be available on the company's website. Following the
live event, an audio playback of the webcast and the slide presentation will
be available on the company's website.

To view the slides or to listen to the webcast or the playback, visit the
"Webcasts & Presentations" section of the Travelers investor relations website
at http://investor.travelers.com.

About Travelers
The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of property
casualty insurance for auto, home and business. The company’s diverse business
lines offer its customers a wide range of coverage sold primarily through
independent agents and brokers. A component of the Dow Jones Industrial
Average, Travelers has more than 30,000 employees and operations in the United
States and selected International markets. For more information, visit
www.travelers.com.

From time to time, Travelers may use its website as a channel of distribution
of material company information. Financial and other material information
regarding the company is routinely posted on and accessible at
http://investor.travelers.com. In addition, you may automatically receive
email alerts and other information about Travelers by enrolling your email by
visiting the “Email Alert Service” section at http://investor.travelers.com.

Travelers has organized its businesses into the following reportable business
segments:

Business Insurance: The Business Insurance segment offers a broad array of
property and casualty insurance and insurance-related services to its clients
primarily in the United States. Business Insurance is organized into the
following six groups, which collectively comprise Business Insurance Core
operations: Select Accounts; Commercial Accounts; National Accounts;
Industry-Focused Underwriting including Construction, Technology, Public
Sector Services, Oil & Gas and Agribusiness; Target Risk Underwriting
including National Property, Inland Marine, Ocean Marine, Excess Casualty,
Boiler & Machinery and Global Partner Services; and Specialized Distribution
including Northland and National Programs. Business Insurance also includes
the Special Liability Group (which manages the company’s asbestos and
environmental liabilities) and the assumed reinsurance and certain other
runoff operations, which collectively are referred to as Business Insurance
Other.

Financial, Professional & International Insurance: The Financial, Professional
& International Insurance segment includes surety and financial liability
coverages, which primarily use credit-based underwriting processes, as well as
property and casualty products that are primarily marketed on a domestic basis
in the United Kingdom, Canada and the Republic of Ireland, and on an
international basis through Lloyd’s. The businesses in Financial, Professional
& International Insurance are Bond & Financial Products and International.

Personal Insurance: The Personal Insurance segment writes a broad range of
property and casualty insurance covering individuals’ personal risks. The
primary products of automobile and homeowners insurance are complemented by a
broad suite of related coverages.

Forward-Looking Statement

This press release 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”,
“anticipates”, “expects”, “intends”, “plans”, “projects”, “believes”,
“estimates” and similar expressions are used to identify these forward-looking
statements. Specifically, statements about the company’s share repurchase
plans, strategies to improve profitability, expected margin improvement,
future pension plan contributions and the potential impact of investment
markets, and other economic conditions on the company’s investment portfolio
and underwriting results, among others, are forward looking, and the company
may also make forward-looking statements about, among other things:

  *its results of operations and financial condition (including, among other
    things, premium volume, premium rates, net and operating income,
    investment income and performance, return on equity, and expected current
    returns and combined ratios);
  *the sufficiency of the company’s asbestos and other reserves;
  *the impact of emerging claims issues as well as other insurance and
    non-insurance litigation;
  *the cost and availability of reinsurance coverage;
  *catastrophe losses;
  *the impact of investment, economic and underwriting market conditions; and
  *strategic initiatives.

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.

Some of the factors that could cause actual results to differ include, but are
not limited to, the following:

  *catastrophe losses could materially and adversely affect the company’s
    results of operations, its financial position and/or liquidity, and could
    adversely impact the company’s ratings, the company’s ability to raise
    capital and the availability and cost of reinsurance;
  *during or following a period of financial market disruption or economic
    downturn, the company’s business could be materially and adversely
    affected;
  *if actual claims exceed the company’s claims and claim adjustment expense
    reserves, or if changes in the estimated level of claims and claim
    adjustment expense reserves are necessary, the company’s financial results
    could be materially and adversely affected;
  *the company’s investment portfolio may suffer reduced returns or material
    realized or unrealized losses;
  *the company’s business could be harmed because of its potential exposure
    to asbestos and environmental claims and related litigation;
  *the company is exposed to, and may face adverse developments involving,
    mass tort claims such as those relating to exposure to potentially harmful
    products or substances;
  *the effects of emerging claim and coverage issues on the company’s
    business are uncertain;
  *the intense competition that the company faces could harm its ability to
    maintain or increase its business volumes, and its profitability;
  *the company may not be able to collect all amounts due to it from
    reinsurers, and reinsurance coverage may not be available to the company
    in the future at commercially reasonable rates or at all;
  *the company is exposed to credit risk in certain of its business
    operations;
  *within the United States, the company’s businesses are heavily regulated
    by the states in which it conducts business, including licensing and
    supervision, and changes in regulation may reduce the company’s
    profitability and limit its growth;
  *changes in federal regulation could impose significant burdens on the
    company and otherwise adversely impact its results;
  *a downgrade in the company’s claims-paying and financial strength ratings
    could adversely impact the company’s business volumes, adversely impact
    the company’s ability to access the capital markets and increase the
    company’s borrowing costs;
  *the inability of the company’s insurance subsidiaries to pay dividends to
    the company’s holding company in sufficient amounts would harm the
    company’s ability to meet its obligations, pay future shareholder
    dividends or make future share repurchases;
  *disruptions to the company’s relationships with its independent agents and
    brokers could adversely affectthe company;
  *the company’s efforts to develop new products or expand in targeted
    markets may not be successful and may create enhanced risks;
  *any net deferred tax asset could be adversely affected by a reduction in
    the U.S. Federal corporate income tax rate;
  *other changes to tax laws could adversely impact our investment portfolio
    or operating results;
  *the company may be adversely affected if its pricing and capital models
    provide materially different indications than actual results;
  *the company is subject to a number of risks associated with its business
    outside the United States;
  *new regulations outside of the U.S., including in the European Union,
    could adversely impact the company’s results of operations and limit its
    growth;
  *the company’s business success and profitability depend, in part, on
    effective information technology systems and on continuing to develop and
    implement improvements in technology;
  *if the company experiences difficulties with technology, data security
    and/or outsourcing relationships, the company’s ability to conduct its
    business could be negatively impacted;
  *acquisitions and integration of acquired businesses may result in
    operating difficulties and other unintended consequences;
  *changes to existing accounting standards may adversely impact the
    company’s reported results;
  *the company could be adversely affected if its controls designed to ensure
    compliance with guidelines, policies and legal and regulatory standards
    are not effective;
  *the company’s businesses may be adversely affected if it is unable to hire
    and retain qualified employees;
  *loss of or significant restriction on the use of credit scoring in the
    pricing and underwriting of Personal Insurance products could reduce the
    company’s future profitability; and
  *the company’s repurchase plans depend on a variety of factors, including
    the company’s financial position, earnings, common share price,
    catastrophe losses, funding of the company’s qualified pension plan,
    capital requirements of the company’s operating subsidiaries, legal
    requirements, regulatory constraints, other investment opportunities
    (including mergers and acquisitions), market conditions and other factors.

Our forward-looking statements speak only as of the date of this press release
or as of the date they are made, and we undertake no obligation to update
forward-looking statements. For a more detailed discussion of these factors,
see the information under the captions "Risk Factors" and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in
our most recent annual report on Form 10-K and our quarterly report on Form
10-Q filed with the Securities and Exchange Commission.

  GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF NON-GAAP MEASURES TO
                                GAAP MEASURES

The following measures are used by the company’s management to evaluate
financial performance against historical results and establish targets on a
consolidated basis. In some cases, these measures are considered non-GAAP
financial measures under applicable SEC rules because they are not displayed
as separate line items in the consolidated financial statements or are not
required to be disclosed in the notes to financial statements or, in some
cases, include or exclude certain items not ordinarily included or excluded in
the most comparable GAAP financial measure. Reconciliations of non-GAAP
measures to their most directly comparable GAAP measures also follow.

In the opinion of the company’s management, a discussion of these measures
provides investors, financial analysts, rating agencies and other financial
statement users with a better understanding of the significant factors that
comprise the company’s periodic results of operations and how management
evaluates the company’s financial performance. Internally, the company's
management uses these measures to evaluate performance against historical
results, to establish financial targets on a consolidated basis and for other
reasons, which are discussed below.

Some of these measures exclude net realized investment gains (losses), net of
tax, and/or net unrealized investment gains (losses), net of tax, which can be
significantly impacted by both discretionary and other economic factors and
are not necessarily indicative of operating trends.

Other companies may calculate these measures differently, and, therefore,
their measures may not be comparable to those used by the company’s
management.

RECONCILIATION OF OPERATING INCOME AND CERTAIN OTHER NON-GAAP MEASURES TO NET
INCOME

Operating income is net income excluding the after-tax impact of net realized
investment gains (losses) and discontinued operations. Management uses
operating income to analyze each segment’s performance and as a tool in making
business decisions. Financial statement users also consider operating income
when analyzing the results and trends of insurance companies. Operating
earnings per share is operating income on a per common share basis.

Reconciliation of Operating Income less Preferred Dividends and Net Income
less Preferred Dividends to Net Income

                                                               
                                                                  
                                      Three Months Ended   Twelve Months Ended
                                      December 31,         December 31,
($ in millions, after-tax)           2012      2011     2012       2011
                                                                       
Operating income, less preferred      $  278     $  609    $  2,441    $ 1,389
dividends
Preferred dividends                    -        -       -        1
Operating income                         278        609       2,441      1,390
Net realized investment gains          26       9       32       36
Net income                           $  304    $  618   $  2,473   $ 1,426
                                                                       
Net income, less preferred            $  304     $  618    $  2,473    $ 1,425
dividends
Preferred dividends                    -        -       -        1
Net income                           $  304    $  618   $  2,473   $ 1,426
                                                             

                                                                    
                                                                               
               Twelve Months Ended December 31,
($ in
millions,     2011       2010       2009       2008       2007       2006       2005
after-tax)
                                                                                       
Operating
income, less   $ 1,389     $ 3,040     $ 3,597     $ 3,191     $ 4,496     $ 4,195     $ 2,020
preferred
dividends
Preferred      1        3        3        4        4        5        6     
dividends
Operating        1,390       3,043       3,600       3,195       4,500       4,200       2,026
income
Net realized
investment     36       173      22       (271  )   101      8        35    
gains
(losses)
Income from
continuing       1,426       3,216       3,622       2,924       4,601       4,208       2,061
operations
Discontinued   -        -        -        -        -        -        (439  )
operations
Net income    $ 1,426   $ 3,216   $ 3,622   $ 2,924   $ 4,601   $ 4,208   $ 1,622 
                                                                    

Reconciliation of Operating Earnings per Share to Net Income per Share on a
Basic and Diluted Basis

                                                         
                                                           
                                Three Months Ended   Twelve Months Ended
                                December 31,         December 31,
                              2012       2011    2012       2011
                                                                 
Basic earnings per share
Operating income                $  0.72     $ 1.50   $  6.27     $  3.31
Net realized investment gains    0.07     0.02    0.08      0.09
Net income                     $  0.79    $ 1.52  $  6.35    $  3.40
                                                                 
Diluted earnings per share
Operating income                $  0.72     $ 1.48   $  6.21     $  3.28
Net realized investment gains    0.06     0.03    0.09      0.08
Net income                     $  0.78    $ 1.51  $  6.30    $  3.36
                                                        

Reconciliation of Operating Income by Segment to Total Operating Income

                                                             
                                                                
                                    Three Months Ended   Twelve Months Ended
                                    December 31,         December 31,
($ in millions, after-tax)         2012      2011     2012       2011
                                                                     
                                                                     
Business Insurance                  $ 326      $ 445     $ 1,843     $ 1,354
Financial, Professional &             131        152       642         647
International Insurance
Personal Insurance                  (114 )   77     217      (332  )
Total segment operating income        343        674       2,702       1,669
Interest Expense and Other          (65  )   (65 )   (261  )   (279  )
Total operating income             $ 278    $ 609   $ 2,441   $ 1,390 
                                                             

RECONCILIATION OF ADJUSTED SHAREHOLDERS’ EQUITY TO SHAREHOLDERS’ EQUITY AND
OPERATING RETURN ON EQUITY TO RETURN ON EQUITY

Average shareholders’ equity is (a) the sum of total shareholders’ equity
excluding preferred stock at the beginning and end of each of the quarters for
the period presented divided by (b) the number of quarters in the period
presented times two. Adjusted shareholders’ equity is shareholders’ equity
excluding net unrealized investment gains (losses), net of tax, net realized
investment gains (losses), net of tax, for the period presented, preferred
stock and discontinued operations. Adjusted average shareholders’ equity is
average shareholders’ equity excluding net unrealized investment gains
(losses), net of tax, for all quarters included in the calculation and, for
each quarterly period included in the calculation, that quarter’s net realized
investment gains (losses), net of tax.

Reconciliation of Adjusted Shareholders’ Equity to Shareholders’ Equity

                                                                                                
                                                                                                              
                As of December 31,
($ in          2012        2011        2010        2009        2008        2007        2006        2005        2004
millions)
                                                                                                                        
Adjusted
shareholders'   $ 22,270     $ 21,570     $ 23,375     $ 25,458     $ 25,647     $ 25,783     $ 24,545     $ 22,227     $ 20,087
equity
Net
unrealized
investment        3,103        2,871        1,859        1,856        (146   )     620          453          327          866
gains
(losses), net
of tax
Net realized
investment
gains             32           36           173          22           (271   )     101          8            35           (28    )
(losses), net
of tax
Preferred         -            -            68           79           89           112          129          153          188
stock
Discontinued    -         -         -         -         -         -         -         (439   )   88     
operations
Shareholders'  $ 25,405   $ 24,477   $ 25,475   $ 27,415   $ 25,319   $ 26,616   $ 25,135   $ 22,303   $ 21,201 
equity
                                                                                             

Return on equity is the ratio of annualized net income less preferred
dividends to average shareholders’ equity for the periods presented. Operating
return on equity is the ratio of annualized operating income less preferred
dividends to adjusted average shareholders’ equity for the periods presented.
In the opinion of the company’s management, these are important indicators of
how well management creates value for its shareholders through its operating
activities and its capital management.

Calculation of Operating Return on Equity and Return on Equity

                                                            
                                                               
                             Three Months Ended        Twelve Months Ended
                             December 31,              December 31,
($ in millions, after-tax)  2012        2011        2012        2011
                                                                    
Annualized operating
income, less preferred       $ 1,111      $ 2,437      $ 2,441      $ 1,389
dividends
Adjusted average             22,433    22,053    22,158    22,806 
shareholders' equity
Operating return on equity   5.0    %   11.1   %   11.0   %   6.1    %
                                                                    
Annualized net income,       $ 1,215      $ 2,472      $ 2,473      $ 1,425
less preferred dividends
Average shareholders'        25,655    24,825    25,192    25,075 
equity
Return on equity             4.7    %   10.0   %   9.8    %   5.7    %
                                                             

Average annual operating return on equity over a period is the ratio of:
a) the sum of operating income less preferred dividends for the periods
presented to
b) the sum of: 1) the sum of the adjusted average shareholders’ equity for all
full years in the period presented, and 2) for partial years in the period
presented, the number of quarters in that partial year divided by four,
multiplied by the adjusted average shareholders’ equity of the partial year.

Calculation of Average Annual Operating Return on Equity from January 1, 2005
through December 31, 2012


                                                                                                  
                                                                                                           
                Twelve Months Ended December 31,
($ in          2012        2011        2010        2009        2008        2007        2006        2005
millions)
                                                                                                           
Operating
income, less    $ 2,441      $ 1,389      $ 3,040      $ 3,597      $ 3,191      $ 4,496      $ 4,195      $ 2,020
preferred
dividends
Adjusted
average           22,158       22,806       24,285       25,777       25,668       25,350       23,381       21,118
shareholders'
equity
Operating
return on       11.0   %   6.1    %   12.5   %   14.0   %   12.4   %   17.7   %   17.9   %   9.6    %
equity
                                                                                                           
Average
annual
operating
return on
equity for        12.8   %
the period
January 1,
2005 through
December 31,
2012
                                                                                               

RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN ITEMS TO NET
INCOME

Underwriting gain (loss) is net earned premiums and fee income less claims and
claim adjustment expenses and insurance-related expenses. In the opinion of
the company’s management, it is important to measure the profitability of each
segment excluding the results of investing activities, which are managed
separately from the insurance business. This measure is used to assess each
segment’s business performance and as a tool in making business decisions.
Pre-tax underwriting gain, excluding the impact of catastrophes and net
favorable prior year loss reserve development, is the underwriting gain (loss)
adjusted to exclude claims and claim adjustment expenses, reinstatement
premiums and assessments related to catastrophes and loss reserve development
related to time periods prior to the current year. In the opinion of the
company's management, this measure is meaningful to users of the financial
statements to understand the company's periodic earnings and the variability
of earnings caused by the unpredictable nature (i.e., the timing and amount)
of catastrophes and loss reserve development. This measure is also referred to
as underlying underwriting margin or underlying underwriting gain (loss).

A catastrophe is a severe loss, resulting from natural and man-made events,
including risks such as fire, earthquake, windstorm, explosion, terrorism and
other similar events. Each catastrophe has unique characteristics, and
catastrophes are not predictable as to timing or amount. Their effects are
included in net and operating income and claims and claim adjustment expense
reserves upon occurrence. A catastrophe may result in the payment of
reinsurance reinstatement premiums and assessments from various pools. In the
opinion of the company's management, a discussion of the impact of
catastrophes is meaningful to users of the financial statements to understand
the company’s periodic earnings and the variability in periodic earnings
caused by the unpredictable nature of catastrophes.

Net favorable (unfavorable) prior year loss reserve development is the
increase or decrease in incurred claims and claim adjustment expenses as a
result of the re-estimation of claims and claim adjustment expense reserves at
successive valuation dates for a given group of claims, which may be related
to one or more prior years. In the opinion of the company's management, a
discussion of loss reserve development is meaningful to users of the financial
statements as it allows them to assess the impact between prior and current
year development on incurred claims and claim adjustment expenses, net and
operating income (loss), and changes in claims and claim adjustment expense
reserve levels from period to period.

Reconciliation of Pre-tax Underwriting Gain (Excluding the Impact of
Catastrophes and Net Favorable Prior Year Loss Reserve Development) to Net
Income

                                                    
                                                               
                               Three Months Ended      Twelve Months Ended
                               December 31,            December 31,
($ in millions, after-tax     2012        2011      2012        2011
except as noted)
                                                                    

Pre-tax underwriting gain
excluding the impact of
catastrophes and net           $ 494        $ 163      $ 1,429      $ 581
favorable prior year loss
reserve development
Pre-tax impact of                (1,054 )     (102 )     (1,862 )     (2,562 )
catastrophes
Pre-tax impact of net
favorable prior year loss      222       126     940       715    
reserve development
Pre-tax underwriting gain        (338   )     187        507          (1,266 )
(loss)
Income tax expense (benefit)   (106   )   72      211       (521   )
on underwriting results
Underwriting gain (loss)         (232   )     115        296          (745   )
Net investment income            556          541        2,316        2,330
Other, including interest      (46    )   (47  )   (171   )   (195   )
expense
Operating income                 278          609        2,441        1,390
Net realized investment        26        9       32        36     
gains
Net income                    $ 304      $ 618    $ 2,473    $ 1,426  
                                                             

Reconciliation of Net Income per Diluted Share Excluding the Impact of
Catastrophes to Net Income per Diluted Share^1

                                            
                                      
                                              Three Months
                                              Ended
                                            December 31, 2012
                                              
Net income per diluted share,                 $          2.56
excluding the impact of catastrophes

Impact of catastrophes                                   (1.78         )
                                            
Net income per diluted share                 $          0.78          
^1 Includes the effect of allocating a portion of earnings to participating
share based awards in the per share computation

ADJUSTMENT TO THE GAAP COMBINED RATIO FOR THE INCREMENTAL IMPACT OF THE DIRECT
TO CONSUMER INITIATIVE

GAAP combined ratio is the sum of the loss and loss adjustment expense ratio
(loss and LAE ratio) and the underwriting expense ratio. For GAAP, the loss
and LAE ratio is the ratio of incurred losses and loss adjustment expenses
reduced by an allocation of fee income to net earned premiums. The
underwriting expense ratio is the ratio of underwriting expenses incurred
reduced by an allocation of fee income, and billing and policy fees and other
to net earned premiums. A GAAP combined ratio under 100% generally indicates
an underwriting profit. A GAAP combined ratio over 100% generally indicates an
underwriting loss. The GAAP combined ratio is an operating statistic that
includes GAAP measures in the numerator and the denominator.

Calculation of the GAAP Combined Ratio

                                                            
                                                              
                   Three Months Ended              Twelve Months Ended
                   December 31,                    December 31,
($ in millions,   2012           2011           2012            2011
pre-tax)
                                                                    
Loss and loss
adjustment
expense ratio
Claims and
claim              $  4,167        $  3,617        $  14,676        $ 16,276
adjustment
expenses
Less:
Policyholder          12              15              46              44
dividends
Allocated fee       38           28           124          133    
income
Loss ratio        $  4,117      $  3,574      $  14,506      $ 16,099 
numerator
                                                                    
Underwriting
expense ratio
Amortization of
deferred           $  977          $  976          $  3,910         $ 3,876
acquisition
costs
General and
administrative        929             906             3,610           3,556
expenses (G&A)
Less:
G&A included in
Interest              6               6               23              56
Expense and
Other
Allocated fee         52              41              199             163
income
Billing and
policy fees and     22           25           98           102    
other
Expense ratio     $  1,826      $  1,810      $  7,200       $ 7,111  
numerator
                                                            
Earned premium    $  5,639      $  5,611      $  22,357      $ 22,090 
                                                                    
GAAP combined
ratio ^1
Loss and loss
adjustment            73.0   %        63.7   %        64.9    %       72.9   %
expense ratio
Underwriting        32.4   %      32.2   %      32.2    %     32.2   %
expense ratio
Combined ratio      105.4  %      95.9   %      97.1    %     105.1  %
^1 For purposes of computing GAAP ratios, billing and policy fees and other
(which are a component of other revenues) are allocated as a reduction of
underwriting expenses. In addition, fee income is allocated as a reduction of
losses and loss adjustment expenses and underwriting expenses.
                                              

GAAP combined ratio excluding the incremental impact of the direct to consumer
initiative is the GAAP combined ratio adjusted to exclude the direct, variable
impact of the company’s direct-to-consumer initiative in Personal
Insurance.In the opinion of the company’s management, this is useful in an
analysis of the profitability of the company’s ongoing agency business.

Reconciliation of the Consolidated and Personal Insurance GAAP Combined Ratios
(Excluding the Incremental Impact of the Direct to Consumer Initiative) to the
Consolidated and Personal Insurance GAAP Combined Ratios

                                                               
                                                                  
                                      Three Months Ended   Twelve Months Ended
                                      December 31,         December 31,
                                      2012       2011    2012       2011
                                                                       
Personal Insurance                  
GAAP combined ratio excluding
incremental impact of direct to       113.1  %    97.4 %   99.6   %    111.1 %
consumer initiative
Incremental impact of direct to      2.1    %   2.4  %  2.3    %   2.5   %
consumer initiative
GAAP combined ratio                  115.2  %   99.8 %  101.9  %   113.6 %
                                                                       
Consolidated
GAAP combined ratio excluding
incremental impact of direct to       104.6  %    95.1 %   96.3   %    104.2 %
consumer initiative
Incremental impact of direct to      0.8    %   0.8  %  0.8    %   0.9   %
consumer initiative
GAAP combined ratio                  105.4  %   95.9 %  97.1   %   105.1 %
                                                                 

ADJUSTMENT TO NET WRITTEN PREMIUMS FOR THE IMPACT OF CHANGES IN FOREIGN
EXCHANGE RATES

Adjusting for the impact of changes in foreign exchange rates allowsthe
effect of foreign exchange rate differences to beisolatedin theanalysis of
changes in various financial statement line items that are translated from a
local currency to the company's reporting currency,U.S. dollars.The impact
isdeterminedbyassuming constant foreign exchange rates between periods as
illustrated in the reconciliation below.In the opinion of the company's
management, this is useful in an analysis of the results of the International
market and the Financial, Professional & International (FP&II) segment.

Reconciliation of the Impact of Changes in Foreign Exchange Rates on
International Net Written Premiums to International Net Written Premiums

                                                         
                                                         
                  Three Months Ended          Twelve Months Ended
                   December 31,                 December 31,
($ in millions)   2012     2011     Change  2012       2011       Change
                                                                   
Net written
premiums -
holding foreign    $ 290     $ 278     4   %    $ 1,069     $ 1,149     (7  )%
exchange rates
constant
Impact of
changes in         4                    (12   )           
foreign exchange
rates
Net written       $ 294   $ 278   6   %   $ 1,057   $ 1,149   (8  )%
premiums


Reconciliation of the Impact of Changes in Foreign Exchange Rates on FP&II Net
Written Premiums to FP&II Net Written Premiums

                                                         
                                                         
                  Three Months Ended          Twelve Months Ended
                   December 31,                 December 31,
($ in millions)   2012     2011     Change  2012       2011       Change
                                                                   
Net written
premiums -
holding foreign    $ 804     $ 791     2   %    $ 2,993     $ 3,102     (4  )%
exchange rates
constant
Impact of
changes in         4                    (12   )           
foreign exchange
rates
Net written       $ 808   $ 791   2   %   $ 2,981   $ 3,102   (4  )%
premiums
                                                      

RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO BOOK VALUE PER SHARE AND
SHAREHOLDERS’ EQUITY

Book value per share is total common shareholders’ equity divided by the
number of common shares outstanding. Adjusted book value per share is total
common shareholders’ equity excluding the after-tax impact of net unrealized
investment gains and losses, divided by the number of common shares
outstanding.  In the opinion of the company’s management, adjusted book value
is useful in an analysis of a property casualty company’s book value as it
removes the effect of changing prices on invested assets (i.e., net unrealized
investment gains (losses), net of tax), which do not have an equivalent impact
on unpaid claims and claim adjustment expense reserves. Tangible book value
per share is adjusted book value per share excluding the after-tax value of
goodwill and other intangible assets divided by the number of common shares
outstanding. In the opinion of the company’s management, tangible book value
per share is useful in an analysis of a property casualty company’s book value
on a nominal basis as it removes certain effects of purchase accounting (i.e.,
goodwill and other intangible assets), in addition to the effect of changing
prices on invested assets.

Reconciliation of Tangible and Adjusted Shareholders’ Equity to Shareholders’
Equity

                                                              
                                                               
                                                   As of
                                                   December 31,   December 31,
($ in millions, except per share amounts)         2012          2011
                                                                  
Tangible shareholders' equity                      $  18,604      $  17,856
Goodwill                                              3,365          3,365
Other intangible assets                               381            433
Less: Impact of deferred tax on other intangible    (48     )    (48     )
assets
Adjusted shareholders' equity                         22,302         21,606
Net unrealized investment gains, net of tax         3,103       2,871   
Shareholders' equity                              $  25,405    $  24,477  
                                                                  
Common shares outstanding                           377.4       392.8   
                                                                  
Tangible book value per share                      $  49.29       $  45.46
Adjusted book value per share                         59.09          55.01
Book value per share                                67.31       62.32   
                                                                     

RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO TOTAL CAPITALIZATION

Total capitalization is the sum of total shareholders’ equity and debt.
Debt-to-capital ratio excluding net unrealized gain on investments isthe
ratio of debttototal capitalization excluding the after-tax impact of net
unrealized investment gains and losses.In the opinion of the company's
management, the debt to capital ratio is useful in an analysis of the
company's financial leverage.

Reconciliation of Total Debt and Equity Excluding Net Unrealized Investment
Gain to Total Capitalization

                                                              
                                                               
                                                   As of
                                                   December 31,   December 31,
($ in millions)                                   2012          2011
                                                                  
Debt                                               $  6,350       $  6,605
Shareholders' equity                                25,405      24,477  
Total capitalization                                31,755      31,082  
Net unrealized investment gains, net of tax         3,103       2,871   
Total capitalization excluding net unrealized     $  28,652    $  28,211  
gain on investments, net of tax
                                                                  
Debt-to-capital ratio                                 20.0    %      21.3    %
Debt-to-capital ratio excluding net unrealized      22.2    %    23.4    %
investment gains, net of tax
                                                                     

OTHER DEFINITIONS

Gross written premiums reflect the direct and assumed contractually determined
amounts charged to policyholders for the effective period of the contract
based on the terms and conditions of the insurance contract. Net written
premiums reflect gross written premiums less premiums ceded to reinsurers.
These are GAAP measures.

For the Business Insurance and Financial, Professional and International
Insurance segments, retention is the  amount of premium available for renewal
that was retained, excluding rate and exposure changes. For the Personal
Insurance segment, retention is the ratio of the expected number of renewal
policies that will be retained throughout the annual policy period to the
number of available renewal base policies. For all of the segments, renewal
rate change represents the estimated change in average premium on policies
that renew, excluding exposure changes. Exposure is the measure of risk used
in the pricing of an insurance product. The change in exposure is the amount
of change in premium on policies that renew attributable to the change in
portfolio risk. Renewal premium change represents the estimated change in
average premium on policies that renew, including rate and exposure changes.
New business volume is the amount of written premium related to new
policyholders and additional products sold to existing policyholders. These
are operating statistics, which are subject to change based upon a number of
factors, including changes in actuarial estimates. For the Business Insurance
segment, retention, renewal premium change and new business volumes exclude
National Accounts and Business Insurance-Other.

An insurance company’s statutory surplus represents the excess of its assets
over its liabilities in accordance with the statutory accounting practices
required by state laws and regulations.

Holding company liquidity is the total funds available at the holding company
level to fund general corporate purposes, primarily the payment of shareholder
dividends and debt service. These funds consist of total cash, short-term
invested assets and other readily marketable securities held by the holding
company.

For a glossary of other financial terms used in this press release, we refer
you to the company’s most recent annual report on Form 10-K filed with the
Securities and Exchange Commission.

Contact:

The Travelers Companies, Inc.
Media:
Patrick Linehan, 917-778-6267
or
Institutional Investors:
Gabriella Nawi, 917-778-6844, or
Andrew Hersom, 860-277-0902
or
Individual Investors:
Marc Parr, 860-277-0779
 
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