Travelers Reports Excellent Fourth Quarter and Full Year Results, Including Strong Earnings and Premium Growth

Fourth Quarter 2021 Record Net Income per Diluted Share of $5.37 and Return on Equity of 18.6%

Fourth Quarter 2021 Record Core Income per Diluted Share of $5.20 and Core Return on Equity of 19.8%

Full Year Net Income of $3.662 billion, up 36%, and Return on Equity of 12.7%

Full Year Core Income of $3.522 billion, up 31%, and Core Return on Equity of 13.7%

• Record fourth quarter net income of $1.333 billion and record core income of $1.289 billion.
• Consolidated combined ratio of 88.0% and underlying combined ratio of 88.7%.
• Net written premiums of $7.995 billion, up 10% compared to the prior year quarter; record full year net written premiums of $31.959 billion, up 7% compared to the prior year.
• Net written premium growth in all three segments compared to the prior year quarter; Business Insurance up 9%, Bond & Specialty Insurance up 13% and Personal Insurance up 10%.
• Total capital returned to shareholders of $1.017 billion, including $801 million of share repurchases; full year total capital returned to shareholders of $3.076 billion, including $2.200 billion of share repurchases.
• Book value per share of $119.77, up 4% from year-end 2020; adjusted book value per share of $109.76, up 10% from year-end 2020.
• Board of Directors declares regular quarterly cash dividend of $0.88 per share.

The Travelers Companies, Inc. today reported net income of $1.333 billion, or $5.37 per diluted share, for the quarter ended December 31, 2021, compared to $1.310 billion, or $5.10 per diluted share, in the prior year quarter. Core income in the current quarter was $1.289 billion, or $5.20 per diluted share, compared to $1.262 billion, or $4.91 per diluted share, in the prior year quarter. Core income increased primarily due to higher net investment income and a higher underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses), partially offset by lower net favorable prior year reserve development. Net realized investment gains in the current quarter were $58 million pre-tax ($44 million after-tax), compared to $50 million pre-tax ($48 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.

“We are very pleased to report outstanding results for the fourth quarter and full year, including meaningful top line growth, strong margins and excellent returns from our investment portfolio,” said Alan Schnitzer, Chairman and Chief Executive Officer. “Another year of exceptional performance is a testament to our franchise value, underwriting excellence and investment expertise.

“Core income for the quarter was $1.3 billion, or $5.20 per diluted share, generating core return on equity of 19.8%. These results were driven by strong underlying underwriting income and returns from our investment portfolio. Our higher underlying underwriting income was driven by record net earned premiums of $8 billion and an excellent underlying combined ratio of 88.7%. For the full year, record underlying underwriting income of $2.3 billion after-tax contributed meaningfully to the 31% increase in core income to $3.5 billion, or $13.94 per diluted share. Our high-quality investment portfolio generated after-tax net investment income of $2.5 billion for the year. Our impressive operating results, together with our strong balance sheet, enabled us to grow adjusted book value per share by more than 10% during the year, after returning $3.1 billion of excess capital to shareholders, including $2.2 billion of share repurchases, and making important investments in our business.

“Our best-in-class marketplace execution enabled us to grow net written premiums by 10% this quarter to $8 billion, with each of our three segments contributing. In Business Insurance, net written premiums grew by 9%, with renewal premium change of 9.2% near an all-time high, while retention was higher than in the prior year quarter. In addition, new business was up 16% year over year. In Bond & Specialty Insurance, net written premiums increased by 13%, driven by renewal premium change of 10.9% and continued strong retention in our management liability business. In Personal Insurance, net written premiums increased by 10%. Policies in force in both Auto and Homeowners increased to record levels, driven by continued strong retention and new business. Renewal premium change improved in Auto to 1.2% and remained strong in Homeowners at 8.7%.

“Our Perform and Transform call to action once again served us well in 2021. In addition to delivering excellent financial results today, we continue to leverage our scale and resources to execute on our ambitious innovation agenda for tomorrow. We’re enriching 160 years of insurance expertise by investing in digital tools and virtual capabilities, deploying robotics and proprietary AI models, and hiring and developing top data scientists, engineers, roboticists and meteorologists, among others, to build the insurance company of the future. Looking forward, with the best talent in the industry, we remain well positioned to capitalize on opportunities and deliver industry leading returns.”

Fourth Quarter 2021 Results

(All comparisons vs. fourth quarter 2020, unless noted otherwise)

Net income of $1.333 billion increased $23 million, primarily due to higher core income. Core income of $1.289 billion increased $27 million, primarily due to higher net investment income and a higher underlying underwriting gain, partially offset by lower net favorable prior year reserve development. The underlying underwriting gain benefited from higher business volumes. Net realized investment gains were $58 million pre-tax ($44 million after-tax), compared to $50 million pre-tax ($48 million after-tax) in the prior year quarter.

Combined ratio:

• The combined ratio of 88.0% increased 1.3 points due to lower net favorable prior year reserve development (1.2 points) and higher catastrophe losses (0.1 points).

• The underlying combined ratio of 88.7% was comparable to the prior year quarter. See below for further details by segment.

• Net favorable prior year reserve development in Business Insurance and Bond & Specialty Insurance was partially offset by net unfavorable prior year reserve development in Personal Insurance. See below for further details by segment.

• Catastrophe losses primarily resulted from tornado activity in Kentucky, windstorms in multiple states and a wildfire in Colorado. Catastrophe and non-catastrophe weather-related losses in the fourth quarter of 2021 were reduced by $255 million of recoveries available under the Company’s 2021 Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty. There were no recoveries under the Company’s 2020 Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty in the fourth quarter of 2020, as the treaty was fully utilized in the third quarter of 2020.

Net investment income of $743 million pre-tax ($624 million after-tax) increased 10%. Income from the non-fixed income investment portfolio increased over the prior year quarter, primarily due to higher private equity and real estate partnership returns. Non-fixed income returns are generally reported on a one-quarter lagged basis and directionally follow the broader equity markets. Income from the fixed income investment portfolio increased slightly over the prior year quarter, primarily due to growth in fixed maturity investments, partially offset by lower interest rates.

Net written premiums of $7.995 billion increased 10%. See below for further details by segment.

Full Year 2021 Results

(All comparisons vs. full year 2020, unless noted otherwise)

Net income of $3.662 billion increased $965 million, primarily due to higher core income and higher net realized investment gains. Core income of $3.522 billion increased by $836 million, primarily due to higher net investment income, a higher underlying underwriting gain and higher net favorable prior year reserve development, partially offset by higher catastrophe losses. The underlying underwriting gain benefited from higher business volumes. Net realized investment gains were $171 million pre-tax ($132 million after-tax), compared to $2 million pre-tax ($11 million after-tax) in the prior year.

Combined ratio:

• The combined ratio of 94.5% improved 0.5 points due to higher net favorable prior year reserve development (0.6 points) and a lower underlying combined ratio (0.4 points), partially offset higher catastrophe losses (0.5 points).

• The underlying combined ratio of 90.3% improved 0.4 points. See below for further details by segment.

• Net favorable prior year reserve development occurred in all segments. See below for further details by segment.

• Catastrophe losses included the fourth quarter events described above, as well as Hurricane Ida, winter storms and severe wind and hail storms in several regions of the United States in the first nine months of 2021. Catastrophe and non-catastrophe weather-related losses in 2021 were reduced by $350 million of recoveries available under the Company’s 2021 Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty. Catastrophe and non-catastrophe weather-related losses in 2020 were reduced by $280 million of recoveries available under the Company’s 2020 Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty.

Net investment income of $3.033 billion pre-tax ($2.541 billion after-tax) increased 36%. Income from the non-fixed income investment portfolio increased from the prior year, primarily due to higher private equity partnership returns. Income from the fixed income investment portfolio decreased from the prior year, primarily due to lower interest rates, partially offset by growth in fixed maturity investments.

Net written premiums of $31.959 billion increased 7%. See below for further details by segment.

Shareholders’ Equity

Shareholders’ equity of $28.887 billion decreased 1% from year-end 2020, primarily due to lower net unrealized investment gains resulting from higher interest rates, common share repurchases and dividends to shareholders, partially offset by net income of $3.662 billion. Net unrealized investment gains included in shareholders’ equity were $3.060 billion pre-tax ($2.415 billion after-tax) compared to $5.175 billion pre-tax ($4.074 billion after-tax) at year-end 2020. Book value per share of $119.77 increased 4% over year-end 2020. Adjusted book value per share of $109.76, which excludes net unrealized investment gains, increased 10% over year-end 2020.

The Company repurchased 5.1 million shares during the fourth quarter at an average price of $156.26 per share for a total of $801 million. At December 31, 2021, the Company had $4.005 billion of capacity remaining under its share repurchase authorization approved by the Board of Directors. At the end of the quarter, statutory capital and surplus was $23.906 billion, and the ratio of debt-to-capital was 20.2%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains included in shareholders’ equity was 21.6%, within the Company’s target range of 15% to 25%.

The Board of Directors declared a regular quarterly dividend of $0.88 per share. The dividend is payable on March 31, 2022 to shareholders of record at the close of business on March 10, 2022.

Fourth Quarter 2021 Results

(All comparisons vs. fourth quarter 2020, unless noted otherwise)

Segment income for Business Insurance was $867 million after-tax, an increase of $154 million. Segment income increased primarily due to a higher underlying underwriting gain and higher net investment income, partially offset by lower net favorable prior year reserve development. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

• The combined ratio of 87.0% improved 2.8 points due to a lower underlying combined ratio (3.8 points) and a higher benefit related to catastrophe losses (0.4 points), partially offset by lower net favorable prior year reserve development (1.4 points).

• The underlying combined ratio of 89.8% improved 3.8 points, primarily reflecting earned pricing that exceeded loss cost trends, a favorable impact associated with the pandemic, a lower level of property losses and a lower expense ratio.

• Net favorable prior year reserve development was primarily driven by better than expected loss experience in domestic operations in the workers’ compensation product line for multiple accident years.

Net written premiums of $3.966 billion increased 9%, reflecting strong renewal premium change and retention, as well as higher new business levels.

Full Year 2021 Results

(All comparisons vs. full year 2020, unless noted otherwise)

Segment income for Business Insurance was $2.385 billion after-tax, an increase of $1.076 billion. Segment income increased primarily due to higher net investment income, a higher underlying underwriting gain and net favorable prior year reserve development (compared to net unfavorable prior year reserve development in the prior year), partially offset by higher catastrophe losses. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

• The combined ratio of 95.7% improved 4.6 points due to a lower underlying combined ratio (3.8 points) and net favorable prior year reserve development compared to net unfavorable prior year reserve development in the prior year (1.7 points), partially offset by higher catastrophe losses (0.9 points).

• The underlying combined ratio of 91.7% improved 3.8 points, primarily reflecting earned pricing that exceeded loss cost trends and a favorable impact associated with the pandemic.

• Net favorable prior year reserve development was primarily driven by better than expected loss experience in domestic operations in the workers’ compensation product line for multiple accident years and in the commercial property and commercial automobile product lines for recent accident years, as well as better than expected loss experience in the segment’s international operations for recent accident years, partially offset by an increase in asbestos reserves of $225 million, an increase in other reserves related to run-off operations and an increase to environmental reserves. Net unfavorable prior year reserve development in the prior year included an increase in asbestos reserves of $295 million.

Net written premiums of $16.092 billion increased 4%, and benefited from strong renewal premium change and retention.

Fourth Quarter 2021 Results

(All comparisons vs. fourth quarter 2020, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $170 million after-tax, an increase of $6 million. Segment income increased primarily due to a higher underlying underwriting gain, partially offset by higher catastrophe losses and lower net favorable prior year reserve development. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

• The combined ratio of 81.5% increased 0.6 points due to lower net favorable prior year reserve development (1.2 points) and higher catastrophe losses (1.1 points), partially offset by a lower underlying combined ratio (1.7 points).

• The underlying combined ratio of 83.3% improved 1.7 points, primarily reflecting earned pricing that exceeded loss cost trends and a lower expense ratio.

• Net favorable prior year reserve development was primarily driven by better than expected loss experience in the segment’s domestic operations in the fidelity and surety product lines for recent accident years.

Net written premiums of $905 million increased 13%, reflecting strong retention and renewal premium change in management liability and strong production in surety.

Full Year 2021 Results

(All comparisons vs. full year 2020, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $668 million after-tax, an increase of $195 million. Segment income increased primarily due to a higher underlying underwriting gain, net favorable prior year reserve development in the current year (compared to an insignificant amount of net unfavorable prior year reserve development in the prior year) and higher net investment income, partially offset by higher catastrophe losses. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

• The combined ratio of 81.5% improved 5.9 points due to a lower underlying combined ratio (3.5 points) and net favorable prior year reserve development in the current year (3.3 points), partially offset by higher catastrophe losses (0.9 points).

• The underlying combined ratio of 83.5% improved 3.5 points, primarily reflecting earned pricing that exceeded loss cost trends, a lower level of losses associated with the pandemic and a lower expense ratio.

• Net favorable prior year reserve development was primarily driven by better than expected loss experience in the segment’s domestic operations in the fidelity and surety product lines for multiple accident years, partially offset by higher than expected loss experience in the general liability product line for management liability coverages for multiple accident years.

Net written premiums of $3.376 billion increased 14%, driven by the same factors described above for the fourth quarter of 2021.

Fourth Quarter 2021 Results

(All comparisons vs. fourth quarter 2020, unless noted otherwise)

Segment income for Personal Insurance was $327 million after-tax, a decrease of $130 million. Segment income decreased primarily due to a lower underlying underwriting gain, net unfavorable prior year reserve development (compared to net favorable prior year reserve development in the prior year quarter) and higher catastrophe losses, partially offset by higher net investment income. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

• The combined ratio of 91.1% increased 7.0 points due to a higher underlying combined ratio (5.6 points), net unfavorable prior year reserve development compared to favorable prior year reserve development in the prior year quarter (0.9 points) and higher catastrophe losses (0.5 points).

• The underlying combined ratio of 88.7% increased 5.6 points, primarily driven by higher losses in the automobile product line due to a comparison to a low level of loss activity in the prior year quarter as a result of the pandemic and, to a lesser extent, elevated severity in the current quarter, partially offset by lower losses in the homeowners and other product line.

• Net unfavorable prior year reserve development was not significant in the quarter.

Net written premiums of $3.124 billion increased 10%. Domestic Automobile net written premiums increased 8%, driven by strong retention and new business. Domestic Homeowners and Other net written premiums increased 13%, driven by strong retention and renewal premium change of 8.7%.

Full Year 2021 Results

(All comparisons vs. full year 2020, unless noted otherwise)

Segment income for Personal Insurance was $760 million after-tax, a decrease of $435 million. Segment income decreased primarily due to a lower underlying underwriting gain, lower net favorable prior year reserve development and higher catastrophe losses, partially offset by higher net investment income. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

• The combined ratio of 96.5% increased 6.8 points due to a higher underlying combined ratio (5.2 points) and lower net favorable prior year reserve development (1.9 points), partially offset by a smaller impact from catastrophe losses (0.3 points).

• The underlying combined ratio of 90.2% increased 5.2 points, primarily driven by higher losses in the automobile product line due to a comparison to a low level of loss activity (net of premium refunds) in the prior year as a result of the pandemic and, to a lesser extent, elevated severity in the current year and higher losses in the homeowners and other product line.

• Net favorable prior year reserve development was primarily driven by better than expected loss experience in the segment’s domestic operations in both the homeowners and other and automobile product lines for recent accident years.

Net written premiums of $12.491 billion increased 10%. Excluding premium refunds provided to personal automobile customers primarily in 2020, net written premiums increased 8%. Domestic Automobile net written premiums increased 9%. Excluding the impact of premium refunds, Domestic Automobile net written premiums increased 4%, driven by strong retention and higher levels of new business. Domestic Homeowners and Other net written premiums increased 12%, driven by strong retention, renewal premium change of 8.3% and higher levels of new business.

Financial Supplement and Conference Call

The information in this press release should be read in conjunction with the 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 Thursday, January 20, 2022. Investors can access the call via webcast at http://investor.travelers.com or by dialing 1.844.895.1976 within the United States and 1.647.689.5389 outside the United States. Prior to the webcast, a slide presentation pertaining to the quarterly earnings will be available on the Company’s website.

Following the live event, replays will be available via webcast for one year at http://investor.travelers.com and by telephone for 30 days by dialing 1.800.585.8367 within the United States or 1.416.621.4642 outside the United States. All callers should use conference ID 4999622.

About Travelers

The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of property casualty insurance for auto, home and business. A component of the Dow Jones Industrial Average, Travelers has approximately 30,000 employees and generated revenues of approximately $35 billion in 2021. For more information, visit www.travelers.com.

Travelers may use its website and/or social media outlets, such as Facebook and Twitter, as distribution channels of material Company information. Financial and other important information regarding the Company is routinely accessible through and posted on our website at http://investor.travelers.com, our Facebook page at https://www.facebook.com/travelers and our Twitter account (@Travelers) at https://twitter.com/travelers. In addition, you may automatically receive email alerts and other information about Travelers when you enroll your email address by visiting the Email Notifications section at http://investor.travelers.com.

Travelers is organized into the following reportable business segments:

Business Insurance - Business Insurance offers a broad array of property and casualty insurance products and services to its customers, primarily in the United States, as well as in Canada, the United Kingdom, the Republic of Ireland and throughout other parts of the world as a corporate member of Lloyd’s.

Bond & Specialty Insurance - Bond & Specialty Insurance offers surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to its customers, primarily in the United States, and certain surety and specialty insurance products in Canada, the United Kingdom and the Republic of Ireland, as well as Brazil through a joint venture, in each case utilizing various degrees of financially-based underwriting approaches.

Personal Insurance - Personal Insurance offers a broad range of property and casualty insurance products and services covering individuals’ personal risks, primarily in the United States, as well as in Canada. The primary products of automobile and homeowners insurance are complemented by a broad suite of related coverages.

* * * * *

Forward-Looking Statements

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,” “views,” “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;
• the impact of COVID-19 and related economic conditions;
• the impact of legislative or regulatory actions or court decisions taken in response to COVID-19 or otherwise;
• share repurchase plans;
• 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;
• catastrophe losses;
• the impact of investment, economic and underwriting market conditions, including inflation;
• strategic and operational initiatives to improve profitability and competitiveness;
• the Company’s competitive advantages and innovation agenda;
• new product offerings; and
• the impact of developments in the tort 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.

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

Insurance-Related Risks

• high levels of catastrophe losses;
• actual claims may exceed the Company’s claims and claim adjustment expense reserves, or the estimated level of claims and claim adjustment expense reserves may increase, including as a result of, among other things, changes in the legal/tort, regulatory and economic environments;
• the Company’s potential exposure to asbestos and environmental claims and related litigation;
• the Company is exposed to, and may face adverse developments involving, mass tort claims; and
• the effects of emerging claim and coverage issues on the Company’s business are uncertain, and court decisions or legislative changes that take place after the Company issues its policies can result in an unexpected increase in the number of claims.

Financial, Economic and Credit Risks

• a period of financial market disruption or an economic downturn;
• the Company’s investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses;
• the Company is exposed to credit risk related to reinsurance and structured settlements, and reinsurance coverage may not be available to the Company;
• the Company is exposed to credit risk in certain of its insurance operations and with respect to certain guarantee or indemnification arrangements that it has with third parties;
• a downgrade in the Company’s claims-paying and financial strength ratings; and
• the Company’s insurance subsidiaries may be unable to pay dividends to the Company’s holding company in sufficient amounts.

Business and Operational Risks

• the impact of COVID-19 and related risks, including with respect to revenues, claims and claim adjustment expenses, general and administrative expenses, investments, inflation, adverse legislative and/or regulatory action, operational disruptions and heightened cyber security risks and foreign currency exchange rate changes;
• the intense competition that the Company faces, and the impact of innovation, technological change and changing customer preferences on the insurance industry and the markets in which it operates;
• disruptions to the Company’s relationships with its independent agents and brokers or the Company’s inability to manage effectively a changing distribution landscape;
• the Company’s efforts to develop new products, expand in targeted markets, improve business processes and workflows or make acquisitions may not be successful and may create enhanced risks;
• the Company’s pricing and capital models may provide materially different indications than actual results;
• loss of or significant restrictions on the use of particular types of underwriting criteria, such as credit scoring, or other data or methodologies, in the pricing and underwriting of the Company’s products; and
• the Company is subject to additional risks associated with its business outside the United States.

Technology and Intellectual Property Risks

• as a result of cyber attacks or otherwise, the Company may experience difficulties with technology, data and network security or outsourcing relationships;
• the Company’s dependence on effective information technology systems and on continuing to develop and implement improvements in technology; and
• the Company may be unable to protect and enforce its own intellectual property or may be subject to claims for infringing the intellectual property of others.

Regulatory and Compliance Risks

• changes in regulation, including higher tax rates; and
• the Company’s compliance controls may not be effective.

In addition, the Company’s share repurchase plans depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels commensurate with the Company’s desired ratings from independent rating agencies, changes in levels of written premiums, 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 and related financings), market conditions, changes in tax laws and other factors, including the ongoing level of uncertainty related to COVID-19.

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,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Forward Looking Statements” in the quarterly report on Form 10-Q filed with the Securities and Exchange Commission (SEC) on October 19, 2021, and in our most recent annual report on Form 10-K filed with the SEC on February 11, 2021, in each case as updated by our periodic filings with the SEC.

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

The following measures are used by the Company’s management to evaluate financial performance against historical results, to establish performance targets on a consolidated basis and for other reasons as discussed below. 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 these measures to the most 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.

Some of these measures exclude net realized investment gains (losses), net of tax, and/or net unrealized investment gains (losses), net of tax, included in shareholders’ equity, 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 NET INCOME TO CORE INCOME AND CERTAIN OTHER NON-GAAP MEASURES

Core income (loss) is consolidated net income (loss) excluding the after-tax impact of net realized investment gains (losses), discontinued operations, the effect of a change in tax laws and tax rates at enactment, and cumulative effect of changes in accounting principles when applicable. Segment income (loss) is determined in the same manner as core income (loss) on a segment basis. Management uses segment income (loss) to analyze each segment’s performance and as a tool in making business decisions. Financial statement users also consider core income (loss) when analyzing the results and trends of insurance companies. Core income (loss) per share is core income (loss) on a per common share basis.