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

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 (loss)		$	(307	)			$	(16	)			$	(200	)			$	(11	)
Underwriting gain (loss) includes :
Net favorable prior year reserve development			33					5					22					3
Catastrophes, net of reinsurance			(570	)				(71	)				(370	)				(46	)
Net investment income			96					93					77					77
Other			14					17					9					11
Operating income (loss)		$	(197	)			$	94				$	(114	)			$	77
GAAP combined ratio			115.2		%			99.8		%
GAAP combined ratio excluding incremental impact of direct to consumer initiative			113.1		%			97.4		%
Impact on GAAP combined ratio
Net favorable prior year reserve development			(1.8	)	pts			(0.3	)	pts
Catastrophes, net of reinsurance			30.1		pts			3.7		pts

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.

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