Edgar Filing: TRAVELERS COMPANIES, INC.

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-10898

The Travelers Companies, Inc.

(Exact name of registrant as specified in its charter)

Minnesota		41-0518860
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

485 Lexington Avenue

New York, NY 10017

(Address of principal executive offices) (Zip Code)

(917) 778-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

The number of shares of the Registrant’s Common Stock, without par value, outstanding at April 18, 2016 was 292,394,631.

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The Travelers Companies, Inc.

Quarterly Report on Form 10-Q

For Quarterly Period Ended March 31, 2016

TABLE OF CONTENTS

		Page
	Part I — Financial Information

Item 1.	Financial Statements:

	Consolidated Statement of Income (Unaudited) — Three Months Ended March 31, 2016 and 2015	3

	Consolidated Statement of Comprehensive Income (Unaudited) — Three Months Ended March 31, 2016 and 2015	4

	Consolidated Balance Sheet — March 31, 2016 (Unaudited) and December 31, 2015	5

	Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) — Three Months Ended March 31, 2016 and 2015	6

	Consolidated Statement of Cash Flows (Unaudited) — Three Months Ended March 31, 2016 and 2015	7

	Notes to Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	62

Item 4.	Controls and Procedures	63

	Part II — Other Information

Item 1.	Legal Proceedings	63

Item 1A.	Risk Factors	63

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63

Item 5.	Other Information	64

Item 6.	Exhibits	65

	SIGNATURES	65

	EXHIBIT INDEX	66

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PART 1 — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

(in millions, except per share amounts)

For the three months ended March 31,	2016			2015
Revenues
Premiums	$	5,981		$	5,888
Net investment income	544			592
Fee income	117			114
Net realized investment gains (losses) (1)	(9		)	10
Other revenues	53			25
Total revenues	6,686			6,629

Claims and expenses
Claims and claim adjustment expenses	3,712			3,431
Amortization of deferred acquisition costs	971			963
General and administrative expenses	995			995
Interest expense	91			92
Total claims and expenses	5,769			5,481

Income before income taxes	917			1,148
Income tax expense	226			315
Net income	$	691		$	833

Net income per share
Basic	$	2.33		$	2.58
Diluted	$	2.30		$	2.55

Weighted average number of common shares outstanding
Basic	294.2			320.8
Diluted	297.9			324.5

Cash dividends declared per share	$	0.61		$	0.55

(1) Total other-than-temporary impairment (OTTI) losses were $(28) million and $(4) million for the three months ended March 31, 2016 and 2015, respectively. Of total OTTI, credit losses of $(18) million and $(3) million for the three months ended March 31, 2016 and 2015, respectively, were recognized in net realized investment gains (losses). In addition, unrealized losses from other changes in total OTTI of $(10) million and $(1) million for the three months ended March 31, 2016 and 2015, respectively, were recognized in other comprehensive income (loss) as part of changes in net unrealized gains on investment securities having credit losses recognized in the consolidated statement of income.

The accompanying notes are an integral part of the consolidated financial statements.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

(in millions)

For the three months ended March 31,	2016		2015

Net income	$	691	$	833

Other comprehensive income (loss):
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	714		169
Having credit losses recognized in the consolidated statement of income	5		(5		)
Net changes in benefit plan assets and obligations	16		24
Net changes in unrealized foreign currency translation	103		(274		)
Other comprehensive income (loss) before income taxes	838		(86		)
Income tax expense	267		25
Other comprehensive income (loss), net of taxes	571		(111		)
Comprehensive income	$	1,262	$	722

The accompanying notes are an integral part of the consolidated financial statements.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)

	March 31, 2016			December 31, 2015
	(Unaudited)
Assets
Fixed maturities, available for sale, at fair value (amortized cost $59,490 and $58,878)	$	61,985		$	60,658
Equity securities, available for sale, at fair value (cost $528 and $528)	710			705
Real estate investments	927			989
Short-term securities	4,587			4,671
Other investments	3,469			3,447
Total investments	71,678			70,470
Cash	361			380
Investment income accrued	599			642
Premiums receivable	6,845			6,437
Reinsurance recoverables	8,803			8,910
Ceded unearned premiums	805			656
Deferred acquisition costs	1,899			1,849
Deferred taxes	—			296
Contractholder receivables	4,419			4,374
Goodwill	3,588			3,573
Other intangible assets	275			279
Other assets	2,408			2,318
Total assets	$	101,680		$	100,184

Liabilities
Claims and claim adjustment expense reserves	$	48,640		$	48,295
Unearned premium reserves	12,331			11,971
Contractholder payables	4,419			4,374
Payables for reinsurance premiums	438			296
Deferred taxes	82			—
Debt	6,344			6,344
Other liabilities	5,260			5,306
Total liabilities	77,514			76,586

Shareholders’ equity
Common stock (1,750.0 shares authorized; 292.4 and 295.9 shares issued and outstanding)	22,269			22,172
Retained earnings	30,454			29,945
Accumulated other comprehensive income (loss)	414			(157		)
Treasury stock, at cost (473.2 and 467.6 shares)	(28,971		)	(28,362		)
Total shareholders’ equity	24,166			23,598
Total liabilities and shareholders’ equity	$	101,680		$	100,184

The accompanying notes are an integral part of the consolidated financial statements.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(in millions)

For the three months ended March 31,	2016			2015
Common stock
Balance, beginning of year	$	22,172		$	21,843
Employee share-based compensation	47			66
Compensation amortization under share-based plans and other changes	50			73
Balance, end of period	22,269			21,982
Retained earnings
Balance, beginning of year	29,945			27,251
Net income	691			833
Dividends	(181		)	(178		)
Other	(1		)	—
Balance, end of period	30,454			27,906
Accumulated other comprehensive income (loss), net of tax
Balance, beginning of year	(157		)	880
Other comprehensive income (loss)	571			(111		)
Balance, end of period	414			769
Treasury stock (at cost)
Balance, beginning of year	(28,362		)	(25,138		)
Treasury stock acquired — share repurchase authorization	(550		)	(600		)
Net shares acquired related to employee share-based compensation plans	(59		)	(72		)
Balance, end of period	(28,971		)	(25,810		)
Total shareholders’ equity	$	24,166		$	24,847
Common shares outstanding
Balance, beginning of year	295.9			322.2
Treasury stock acquired — share repurchase authorization	(5.1		)	(5.6		)
Net shares issued under employee share-based compensation plans	1.6			2.1
Balance, end of period	292.4			318.7

The accompanying notes are an integral part of the consolidated financial statements.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

(in millions)

For the three months ended March 31,	2016			2015
Cash flows from operating activities
Net income	$	691		$	833
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment (gains) losses	9			(10		)
Depreciation and amortization	213			225
Deferred federal income tax expense	105			133
Amortization of deferred acquisition costs	971			963
Equity in income from other investments	(17		)	(43		)
Premiums receivable	(393		)	(258		)
Reinsurance recoverables	126			69
Deferred acquisition costs	(1,014		)	(987		)
Claims and claim adjustment expense reserves	226			(561		)
Unearned premium reserves	328			185
Other	(395		)	(350		)
Net cash provided by operating activities	850			199

Cash flows from investing activities
Proceeds from maturities of fixed maturities	1,748			2,830
Proceeds from sales of investments:
Fixed maturities	421			906
Equity securities	14			11
Real estate investments	69			7
Other investments	186			146
Purchases of investments:
Fixed maturities	(2,700		)	(3,325		)
Equity securities	(12		)	(8		)
Real estate investments	(7		)	(6		)
Other investments	(162		)	(168		)
Net sales (purchases) of short-term securities	85			(134		)
Securities transactions in course of settlement	291			305
Other	(79		)	(90		)
Net cash provided by (used in) investing activities	(146		)	474

Cash flows from financing activities
Treasury stock acquired — share repurchase authorization	(550		)	(600		)
Treasury stock acquired — net employee share-based compensation	(59		)	(71		)
Dividends paid to shareholders	(180		)	(177		)
Issuance of common stock — employee share options	64			90
Excess tax benefits from share-based payment arrangements	—			27
Net cash used in financing activities	(725		)	(731		)
Effect of exchange rate changes on cash	2			(8		)
Net decrease in cash	(19		)	(66		)
Cash at beginning of year	380			374
Cash at end of period	$	361		$	308

Supplemental disclosure of cash flow information
Income taxes paid	$	63		$	126
Interest paid	$	42		$	34

The accompanying notes are an integral part of the consolidated financial statements.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Basis of Presentation

The interim consolidated financial statements include the accounts of The Travelers Companies, Inc. (together with its subsidiaries, the Company). These financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP) and are unaudited. In the opinion of the Company’s management, all adjustments necessary for a fair presentation have been reflected. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted. All material intercompany transactions and balances have been eliminated. The accompanying interim consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (the Company’s 2015 Annual Report).

The preparation of the interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made to the 2015 financial statements to conform to the 2016 presentation.

Adoption of Accounting Standards

Compensation — Stock Compensation: Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period

In June 2014, the Financial Accounting Standards Board (FASB) issued updated guidance to resolve diversity in practice concerning employee share-based payments that contain performance targets that could be achieved after the requisite service period. The updated guidance requires that a performance target that affects vesting and that can be achieved after the requisite service period be treated as a performance condition. As such, the performance target that affects vesting should not be reflected in estimating the fair value of the award at the grant date. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which service has been rendered. If the performance target becomes probable of being achieved before the end of the service period, the remaining unrecognized compensation cost for which requisite service has not yet been rendered is recognized prospectively over the remaining service period. The total amount of compensation cost recognized during and after the service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The updated guidance was effective for reporting periods beginning after December 15, 2015. The adoption of this guidance did not have a material effect on the Company’s results of operations, financial position or liquidity.

Derivatives and Hedging: Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity

In November 2014, the FASB issued updated guidance to clarify when the separation of certain embedded derivative features in a hybrid financial instrument that is issued in the form of a share is required. That is, an entity will continue to evaluate whether the economic characteristics and risks of the embedded derivative feature are clearly and closely related to those of the host contract. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The updated guidance was effective for reporting periods beginning after December 15, 2015. The adoption of this guidance did not have a material effect on the Company’s results of operations, financial position or liquidity.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES, Continued

Consolidation: Amendments to the Consolidation Analysis

In February 2015, the FASB issued updated guidance that makes targeted amendments to the current consolidation accounting guidance. The update is in response to accounting complexity concerns, particularly from the asset management industry. The guidance simplifies consolidation accounting by reducing the number of approaches to consolidation, provides a scope exception to registered money market funds and similar unregistered money market funds and ends the indefinite deferral granted to investment companies from applying the variable interest entity guidance. The updated guidance was effective for reporting periods beginning after December 15, 2015. The adoption of this guidance did not have a material effect on the Company’s results of operations, financial position or liquidity.

Interest — Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs

In April 2015, the FASB issued updated guidance to clarify the required presentation of debt issuance costs. The amended guidance requires that debt issuance costs be presented in the balance sheet as a direct reduction from the carrying amount of the recognized debt liability, consistent with the treatment of debt discounts. Amortization of debt issuance costs is to be reported as interest expense. The recognition and measurement guidance for debt issuance costs are not affected by the updated guidance. The updated guidance was effective for reporting periods beginning after December 15, 2015. The updated guidance is consistent with the Company’s accounting policy and its adoption did not have any effect on the Company’s results of operations, financial position or liquidity.

Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments

In September 2015, the FASB issued updated guidance regarding business combinations that requires an acquirer to recognize post-close measurement adjustments for provisional amounts in the period the adjustment amounts are determined rather than retrospectively. The acquirer is also required to recognize, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the provisional amount, calculated as if the accounting had been completed at the acquisition date. The updated guidance is to be applied prospectively effective for reporting periods beginning after December 15, 2015. In connection with business combinations which have already been completed, the adoption of this guidance did not have a material effect on the Company’s results of operations, financial position or liquidity.

Compensation — Stock Compensation: Improvements to Employee Share-Based Payment Accounting

In March 2016, the FASB issued updated guidance to simplify several aspects of accounting for share-based payment transactions as follows:

Accounting for Income Taxes

Under current accounting guidance, if the deduction for a share-based payment award for tax purposes exceeds, or is less than, the compensation cost recognized for financial reporting purposes, the resulting excess tax benefit, or tax deficiency, is reported as part of additional paid-in capital. Under the updated guidance, these excess tax benefits, or tax deficiencies, are reported as part of income tax expense or benefit in the income statement. The updated guidance also removes the requirement to delay recognition of any excess tax benefit when there are no current taxes payable to which the benefit would be applied. The tax-related cash flows resulting from share-based payments are to be included with other income tax cash flows as an operating activity rather than being reported separately as a financing activity.

Forfeitures

The updated guidance permits an entity to make an accounting policy election to either account for forfeitures when they occur or continue to apply the current method of accruing the compensation cost based on the number of awards that are expected to vest.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES, Continued

Minimum Statutory Tax Withholding Requirements

The updated guidance changes the threshold amount an entity can withhold for taxes when settling an equity award and still qualify for equity classification. A company can withhold up to the maximum statutory tax rates in the employees’ applicable jurisdiction rather than withholding up to the employers’ minimum statutory withholding requirement. The update also clarifies that all cash payments made to taxing authorities on behalf of employees for withheld shares are to be presented in financing activities on the statement of cash flows.

Transition

The updated guidance is effective for reporting periods beginning after December 15, 2016. Early adoption is permitted in any interim period; if early adoption is elected, the entity must adopt all of the amendments in the same reporting period and reflect any adjustments as of the beginning of the fiscal year.

The Company adopted the updated guidance effective January 1, 2016. With respect to the forfeiture accounting policy election, the Company elected to retain its policy of accruing the compensation cost based on the number of awards that are expected to vest. The adoption did not result in any cumulative effect adjustments or restatement and did not have a material effect on the Company’s results of operations, financial position or liquidity.

Accounting Standards Not Yet Adopted

Leases

In February 2016, the FASB issued updated guidance to require lessees to recognize a right-to-use asset and a lease liability for leases with terms of more than 12 months. The updated guidance retains the two classifications of a lease as either an operating or finance lease (previously referred to as a capital lease). Both lease classifications require the lessee to record the right-to-use asset and the lease liability based upon the present value of cash flows. Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-to-use asset. Operating leases will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease. The accounting by lessors is not significantly changed by the updated guidance. The updated guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the financial statements.

The updated guidance is effective for reporting periods beginning after December 15, 2018, and will require that the earliest comparative period presented include the measurement and recognition of existing leases with an adjustment to equity as if the updated guidance had always been applied. Early adoption is permitted. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations, financial position or liquidity.

Investments — Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting

In March 2016, the FASB issued updated guidance that eliminates the requirement to retroactively apply the equity method of accounting when an investment that was previously accounted for using another method of accounting becomes qualified to apply the equity method due to an increase in the level of ownership interest or degree of influence. If the investment was previously accounted for as an available-for-sale security, any related unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for the equity method is recognized through earnings. The updated guidance is effective for reporting periods beginning after December 15, 2016, and is to be applied prospectively. Early adoption is permitted. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations, financial position or liquidity.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES, Continued

Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments

In March 2016, the FASB issued updated guidance clarifying that when a call (put) option in a debt instrument can accelerate the repayment of principal on the debt instrument, a reporting entity does not need to assess whether the contingent event that triggers the ability to exercise the call (put) option is related to interest rates or credit risk in determining whether the option should be accounted for separately. The updated guidance is effective for reporting periods beginning after December 15, 2016. Early adoption is permitted. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations, financial position or liquidity.

Additional Accounting Standards Not Yet Adopted

For information regarding additional accounting standards that the Company has not yet adopted, see the “Other Accounting Standards Not Yet Adopted” section of note 1 of notes to the consolidated financial statements in the Company’s 2015 Annual Report.

Nature of Operations

The Company is organized into three reportable business segments: Business and International Insurance; Bond & Specialty Insurance; and Personal Insurance. These segments reflect the manner in which the Company’s businesses are currently managed and represent an aggregation of products and services based on type of customer, how the business is marketed and the manner in which risks are underwritten. For more information regarding the Company’s nature of operations, see the “Nature of Operations” section of note 1 of notes to the consolidated financial statements in the Company’s 2015 Annual Report.

2. SEGMENT INFORMATION

The following tables summarize the components of the Company’s operating revenues, operating income and total assets by reportable business segments:

(for the three months ended March 31, in millions)	Business and International Insurance		Bond & Specialty Insurance		Personal Insurance		Total Reportable Segments
2016
Premiums	$	3,599	$	508	$	1,874	$	5,981
Net investment income	415		52		77		544
Fee income	114		—		3		117
Other revenues	33		3		14		50
Total operating revenues (1)	$	4,161	$	563	$	1,968	$	6,692
Operating income (1)	$	476	$	144	$	139	$	759
2015
Premiums	$	3,620	$	504	$	1,764	$	5,888
Net investment income	454		56		82		592
Fee income	111		—		3		114
Other revenues	8		5		12		25
Total operating revenues (1)	$	4,193	$	565	$	1,861	$	6,619
Operating income (1)	$	515	$	124	$	252	$	891

(1) Operating revenues for reportable business segments exclude net realized investment gains (losses). Operating income for reportable business segments equals net income excluding the after-tax impact of net realized investment gains (losses).

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

2. SEGMENT INFORMATION, Continued

Business Segment Reconciliations

	Three Months Ended March 31,
(in millions)	2016			2015
Revenue reconciliation
Earned premiums
Business and International Insurance:
Domestic:
Workers’ compensation	$	981		$	962
Commercial automobile	491			468
Commercial property	437			440
General liability	482			468
Commercial multi-peril	782			774
Other	5			10
Total Domestic	3,178			3,122
International	421			498
Total Business and International Insurance	3,599			3,620
Bond & Specialty Insurance:
Fidelity and surety	230			225
General liability	234			236
Other	44			43
Total Bond & Specialty Insurance	508			504
Personal Insurance:
Automobile	936			836
Homeowners and Other	938			928
Total Personal Insurance	1,874			1,764
Total earned premiums	5,981			5,888
Net investment income	544			592
Fee income	117			114
Other revenues	50			25
Total operating revenues for reportable segments	6,692			6,619
Other revenues	3			—
Net realized investment gains (losses)	(9		)	10
Total consolidated revenues	$	6,686		$	6,629
Income reconciliation, net of tax
Total operating income for reportable segments	$	759		$	891
Interest Expense and Other (1)	(61		)	(64		)
Total operating income	698			827
Net realized investment gains (losses)	(7		)	6
Total consolidated net income	$	691		$	833

(1) The primary component of Interest Expense and Other for the three months ended March 31, 2016 and 2015 was after-tax interest expense of $59 million and $60 million, respectively.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

2. SEGMENT INFORMATION, Continued

(in millions)	March 31, 2016		December 31, 2015
Asset reconciliation:
Business and International Insurance	$	80,961	$	79,692
Bond & Specialty Insurance	7,537		7,360
Personal Insurance	12,905		12,748
Total assets for reportable segments	101,403		99,800
Other assets (1)	277		384
Total consolidated assets	$	101,680	$	100,184

(1) The primary component of other assets at March 31, 2016 was other intangible assets and the primary components at December 31, 2015 were other intangible assets and deferred taxes.

3. INVESTMENTS

Fixed Maturities

The amortized cost and fair value of investments in fixed maturities classified as available for sale were as follows:

Amortized

Gross Unrealized

Fair

(at March 31, 2016, in millions)

Cost

Gains

Losses

Value

U.S. Treasury securities and obligations of U.S. government and government agencies and authorities

2,128

2,154

Obligations of states, municipalities and political subdivisions:

Local general obligation

13,242

690

13,931

Revenue

9,914

563

10,474

State general obligation

1,944

102

—

2,046

Pre-refunded

5,640

231

—

5,871

Total obligations of states, municipalities and political subdivisions

30,740

1,586

32,322

Debt securities issued by foreign governments

1,794

—

1,846

Mortgage-backed securities, collateralized mortgage obligations and pass-through securities

1,799

131

1,929

All other corporate bonds

22,921

834

135

23,620

Redeemable preferred stock

108

—

114

Total

59,490

2,636

141

61,985

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

3. INVESTMENTS, Continued

	Amortized		Gross Unrealized				Fair
(at December 31, 2015, in millions)	Cost		Gains		Losses		Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,202	$	8	$	16	$	2,194
Obligations of states, municipalities and political subdivisions:
Local general obligation	12,744		577		3		13,318
Revenue	9,492		472		4		9,960
State general obligation	1,978		97		2		2,073
Pre-refunded	5,813		247		—		6,060
Total obligations of states, municipalities and political subdivisions	30,027		1,393		9		31,411
Debt securities issued by foreign governments	1,829		45		1		1,873
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,863		124		6		1,981
All other corporate bonds	22,854		523		288		23,089
Redeemable preferred stock	103		7		—		110
Total	$	58,878	$	2,100	$	320	$	60,658

Pre-refunded bonds of $5.87 billion and $6.06 billion at March 31, 2016 and December 31, 2015, respectively, were bonds for which states or municipalities have established irrevocable trusts, almost exclusively comprised of U.S. Treasury securities, which were created to satisfy their responsibility for payments of principal and interest.

Proceeds from sales of fixed maturities classified as available for sale were $421 million and $906 million during the three months ended March 31, 2016 and 2015, respectively. Gross gains of $23 million and $19 million and gross losses of $7 million and $1 million were realized on those sales during the three months ended March 31, 2016 and 2015, respectively.

Equity Securities

The cost and fair value of investments in equity securities were as follows:

			Gross Unrealized				Fair
(at March 31, 2016, in millions)	Cost		Gains		Losses		Value
Public common stock	$	383	$	174	$	8	$	549
Non-redeemable preferred stock	145		24		8		161
Total	$	528	$	198	$	16	$	710

			Gross Unrealized				Fair
(at December 31, 2015, in millions)	Cost		Gains		Losses		Value
Public common stock	$	386	$	164	$	7	$	543
Non-redeemable preferred stock	142		26		6		162
Total	$	528	$	190	$	13	$	705

Proceeds from sales of equity securities classified as available for sale were $14 million and $11 million during the three months ended March 31, 2016 and 2015, respectively. Gross gains of $3 million and $2 million and gross losses of $2 million and $0 million were realized on those sales during the three months ended March 31, 2016 and 2015, respectively.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

3. INVESTMENTS, Continued

Unrealized Investment Losses

The following tables summarize, for all investments in an unrealized loss position at March 31, 2016 and December 31, 2015, the aggregate fair value and gross unrealized loss by length of time those securities have been continuously in an unrealized loss position. The fair value amounts reported in the tables are estimates that are prepared using the process described in note 4 herein and in note 4 of notes to the consolidated financial statements in the Company’s 2015 Annual Report.

	Less than 12 months				12 months or longer				Total
(at March 31, 2016, in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	171	$	—	$	10	$	1	$	181	$	1
Obligations of states, municipalities and political subdivisions	681		3		141		1		822		4
Debt securities issued by foreign governments	25		—		—		—		25		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	98		—		73		1		171		1
All other corporate bonds	2,010		70		941		65		2,951		135
Redeemable preferred stock	22		—		—		—		22		—
Total fixed maturities	3,007		73		1,165		68		4,172		141
Equity securities
Public common stock	54		8		34		—		88		8
Non-redeemable preferred stock	29		1		59		7		88		8
Total equity securities	83		9		93		7		176		16
Total	$	3,090	$	82	$	1,258	$	75	$	4,348	$	157

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

3. INVESTMENTS, Continued

	Less than 12 months				12 months or longer				Total
(at December 31, 2015, in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	1,820	$	15	$	28	$	1	$	1,848	$	16
Obligations of states, municipalities and political subdivisions	928		7		142		2		1,070		9
Debt securities issued by foreign governments	172		1		—		—		172		1
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	473		4		57		2		530		6
All other corporate bonds	7,725		197		710		91		8,435		288
Redeemable preferred stock	8		—		—		—		8		—
Total fixed maturities	11,126		224		937		96		12,063		320
Equity securities
Public common stock	48		6		33		1		81		7
Non-redeemable preferred stock	47		3		38		3		85		6
Total equity securities	95		9		71		4		166		13
Total	$	11,221	$	233	$	1,008	$	100	$	12,229	$	333

Unrealized losses for all fixed maturities and equity securities reported at fair value for which fair value is less than 80% of amortized cost at March 31, 2016 totaled $50 million, representing less than 1% of the combined fixed maturity and equity security portfolios on a pre-tax basis and less than 1% of shareholders’ equity on an after-tax basis.

Impairment Charges

Impairment charges included in net realized investment gains (losses) in the consolidated statement of income were $18 million and $3 million for the three months ended March 31, 2016 and 2015, respectively.

For fixed maturities held at March 31, 2016 and 2015, the cumulative amount of credit losses recognized in the consolidated statement of income from other-than-temporary impairments (OTTI) was $92 million and $94 million, respectively, on investments for which a portion of the OTTI was recognized in other comprehensive income (loss). These credit losses represent less than 1% of the fixed maturity portfolio on a pre-tax basis and less than 1% of shareholders’ equity on an after-tax basis at both dates. There were no significant changes in the credit component of OTTI during the three months ended March 31, 2016 and 2015 from that disclosed in note 3 of notes to the consolidated financial statements in the Company’s 2015 Annual Report.

Derivative Financial Instruments

From time to time, the Company enters into U.S. Treasury note futures contracts to modify the effective duration of specific assets within the investment portfolio. U.S. Treasury futures contracts require a daily mark-to-market and settlement with the broker. At both March 31, 2016 and December 31, 2015, the Company had $400 million notional value of open U.S. Treasury futures contracts. Net realized investment gains (losses) in the three months ended March 31, 2016 and 2015 included net losses of $19 million and $10 million, respectively, related to U.S. Treasury futures contracts.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

4. FAIR VALUE MEASUREMENTS

The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in the fair value accounting guidance. The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the fair value accounting guidance hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. The level in the fair value hierarchy within which the fair value measurement is reported is based on the lowest level input that is significant to the measurement in its entirety. The three levels of the hierarchy are as follows:

· Level 1 - Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.

· Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

· Level 3 - Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company’s own assumptions about the inputs that market participants would use.

Valuation of Investments Reported at Fair Value in Financial Statements

The Company utilized a pricing service to estimate fair value measurements for approximately 98% of its fixed maturities at both March 31, 2016 and December 31, 2015.

While the vast majority of the Company’s fixed maturities are included in Level 2, the Company holds a number of municipal bonds and corporate bonds which are not valued by the pricing service and estimates the fair value of these bonds using an internal pricing matrix with some unobservable inputs that are significant to the valuation. Due to the limited amount of observable market information, the Company includes the fair value estimates for these particular bonds in Level 3. The fair value of the fixed maturities for which the Company used an internal pricing matrix was $116 million and $101 million at March 31, 2016 and December 31, 2015, respectively. Additionally, the Company holds a small amount of other fixed maturity investments that have characteristics that make them unsuitable for matrix pricing. For these fixed maturities, the Company obtains a quote from a broker (primarily the market maker). The fair value of the fixed maturities for which the Company received a broker quote was $93 million and $117 million at March 31, 2016 and December 31, 2015, respectively. Due to the disclaimers on the quotes that indicate that the price is indicative only, the Company includes these fair value estimates in Level 3.

For more information regarding the valuation of the Company’s fixed maturities, equity securities and other investments, see note 4 of notes to the consolidated financial statements in the Company’s 2015 Annual Report.

Fair Value Hierarchy

The following tables present the level within the fair value hierarchy at which the Company’s financial assets and financial liabilities are measured on a recurring basis at March 31, 2016 and December 31, 2015. An investment transferred between levels during a period is transferred at its fair value as of the beginning of that period.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

4. FAIR VALUE MEASUREMENTS, Continued

(at March 31, 2016, in millions)

Total

Level 1

Level 2

Level 3

Invested assets:

Fixed maturities

U.S. Treasury securities and obligations of U.S. government and government agencies and authorities

2,154

—

Obligations of states, municipalities and political subdivisions

32,322

—

32,309

Debt securities issued by foreign governments

1,846

—

1,846

—

Mortgage-backed securities, collateralized mortgage obligations and pass-through securities

1,929

—

1,927

All other corporate bonds

23,620

—

23,433

187

Redeemable preferred stock

114

104

Total fixed maturities

61,985

2,157

59,619

209

Equity securities

Public common stock

549

—

Non-redeemable preferred stock

161

—

Total equity securities

710

613

—

Other investments

—

Total

62,750

2,786

59,716

248

During the quarter ended March 31, 2016, the Company’s transfers between Level 1 and Level 2 were not significant.

(at December 31, 2015, in millions)	Total		Level 1		Level 2		Level 3

Invested assets:
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,194	$	2,194	$	—	$	—
Obligations of states, municipalities and political subdivisions	31,411		—		31,398		13
Debt securities issued by foreign governments	1,873		—		1,873		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,981		—		1,957		24
All other corporate bonds	23,089		—		22,915		174
Redeemable preferred stock	110		3		100		7
Total fixed maturities	60,658		2,197		58,243		218
Equity securities
Public common stock	543		543		—		—
Non-redeemable preferred stock	162		55		107		—
Total equity securities	705		598		107		—
Other investments	56		18		—		38
Total	$	61,419	$	2,813	$	58,350	$	256

During the year ended December 31, 2015, the Company’s transfers between Level 1 and Level 2 were not significant.

There was no significant activity in Level 3 of the hierarchy during the three months ended March 31, 2016 or the year ended December 31, 2015.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

4. FAIR VALUE MEASUREMENTS, Continued

Financial Instruments Disclosed, But Not Carried, At Fair Value

The following tables present the carrying value and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value, and the level within the fair value hierarchy at which such assets and liabilities are categorized.

(at March 31, 2016, in millions)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Short-term securities	$	4,587	$	4,587	$	1,174	$	3,378	$	35

Financial liabilities:
Debt	$	6,244	$	7,419	$	—	$	7,419	$	—
Commercial paper	$	100	$	100	$	—	$	100	$	—

(at December 31, 2015, in millions)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Short-term securities	$	4,671	$	4,671	$	1,685	$	2,958	$	28

Financial liabilities:
Debt	$	6,244	$	7,180	$	—	$	7,180	$	—
Commercial paper	$	100	$	100	$	—	$	100	$	—

The Company utilized a pricing service to estimate fair value for approximately 98% and 99% of short-term securities at March 31, 2016 and December 31, 2015, respectively. For a description of the process and inputs used by the pricing service to estimate fair value, see the “Fixed Maturities” section in note 4 of notes to the consolidated financial statements in the Company’s 2015 Annual Report.

The Company utilized a pricing service to estimate fair value for 100% of its debt, including commercial paper, at March 31, 2016 and December 31, 2015.

The Company had no material assets or liabilities that were measured at fair value on a non-recurring basis during the three months ended March 31, 2016 or year ended December 31, 2015.

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The following table presents the carrying amount of the Company’s goodwill by segment at March 31, 2016 and December 31, 2015:

(in millions)	March 31, 2016		December 31, 2015
Business and International Insurance (1)	$	2,454	$	2,439
Bond & Specialty Insurance	496		496
Personal Insurance	612		612
Other	26		26
Total	$	3,588	$	3,573

(1) Includes goodwill associated with the Company’s international business which is subject to the impact of changes in foreign currency exchange rates.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

5. GOODWILL AND OTHER INTANGIBLE ASSETS, Continued

Other Intangible Assets

The following tables present a summary of the Company’s other intangible assets by major asset class at March 31, 2016 and December 31, 2015:

(at March 31, 2016, in millions)	Gross Carrying Amount		Accumulated Amortization		Net
Subject to amortization (1)	$	209	$	151	$	58
Not subject to amortization	217		—		217
Total	$	426	$	151	$	275

(at December 31, 2015, in millions)	Gross Carrying Amount		Accumulated Amortization		Net
Subject to amortization (1)	$	210	$	148	$	62
Not subject to amortization	217		—		217
Total	$	427	$	148	$	279

(1) Intangible assets subject to amortization are comprised of fair value adjustments on claims and claim adjustment expense reserves, reinsurance recoverables and other contract and customer-related intangibles. The time value of money and the risk adjustment (cost of capital) components of the intangible asset run off at different rates, and, as such, the amount recognized in income may be a net benefit in some periods and a net expense in other periods.

Amortization expense of intangible assets was $3 million and $11 million for the three months ended March 31, 2016 and 2015, respectively. Intangible asset amortization expense is estimated to be $8 million for the remainder of 2016, $9 million in 2017, $8 million in 2018, $6 million in 2019 and $5 million in 2020.

6. OTHER COMPREHENSIVE INCOME AND ACCCUMULATED OTHER COMPREHENSIVE INCOME

The following table presents the changes in the Company’s accumulated other comprehensive income (AOCI) for the three months ended March 31, 2016.

(in millions)	Changes in Net Unrealized Gains on Investment Securities Having No Credit Losses Recognized in the Consolidated Statement of Income			Changes in Net Unrealized Gains on Investment Securities Having Credit Losses Recognized in the Consolidated Statement of Income			Net Benefit Plan Assets and Obligations Recognized in Shareholders’ Equity			Net Unrealized Foreign Currency Translation			Total Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2015	$	1,100		$	189		$	(713	)	$	(733	)	$	(157	)
Other comprehensive income (loss) (OCI) before reclassifications	474			(4		)	—			90			560
Amounts reclassified from AOCI	(7		)	7			11			—			11
Net OCI, current period	467			3			11			90			571
Balance, March 31, 2016	$	1,567		$	192		$	(702	)	$	(643	)	$	414

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

6. OTHER COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME, Continued

The following table presents the pre-tax components of the Company’s other comprehensive income (loss) and the related income tax expense (benefit) for the three months ended March 31, 2016 and 2015.

(for the three months ended March 31, in millions)	2016		2015

Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	$	714	$	169
Income tax expense	247		56
Net of taxes	467		113
Having credit losses recognized in the consolidated statement of income	5		(5		)
Income tax expense (benefit)	2		(2		)
Net of taxes	3		(3		)
Net changes in benefit plan assets and obligations	16		24
Income tax expense	5		8
Net of taxes	11		16
Net changes in unrealized foreign currency translation	103		(274		)
Income tax expense (benefit)	13		(37		)
Net of taxes	90		(237		)
Total other comprehensive income (loss)	838		(86		)
Total income tax expense	267		25
Total other comprehensive income (loss), net of taxes	$	571	$	(111	)

The following table presents the pre-tax and related income tax (expense) benefit components of the amounts reclassified from the Company’s AOCI to the Company’s consolidated statement of income for the three months ended March 31, 2016 and 2015.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

6. OTHER COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME, Continued

(for the three months ended March 31, in millions)	2016			2015

Reclassification adjustments related to unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income (1)	$	(11	)	$	(18	)
Income tax expense (2)	(4		)	(6		)
Net of taxes	(7		)	(12		)
Having credit losses recognized in the consolidated statement of income (1)	11			—
Income tax benefit (2)	4			—
Net of taxes	7			—
Reclassification adjustment related to benefit plan assets and obligations (3)	16			23
Income tax benefit (2)	5			8
Net of taxes	11			15
Reclassification adjustment related to foreign currency translation (1)	—			—
Income tax benefit (2)	—			—
Net of taxes	—			—
Total reclassifications	16			5
Total income tax benefit	5			2
Total reclassifications, net of taxes	$	11		$	3

(1) (Increases) decreases net realized investment gains (losses) on the consolidated statement of income.

(2) (Increases) decreases income tax expense on the consolidated statement of income.

(3) Increases (decreases) general and administrative expenses on the consolidated statement of income.

7. COMMON SHARE REPURCHASES

During the three months ended March 31, 2016, the Company repurchased 5.1 million shares under its share repurchase authorization for a total cost of $550 million. The average cost per share repurchased was $108.46. At March 31, 2016, the Company had $2.78 billion of capacity remaining under its share repurchase authorization. In addition, the Company acquired 0.5 million shares for a total cost of $59 million during the three months ended March 31, 2016 that were not part of the publicly announced share repurchase authorization. These shares consisted of shares retained to cover payroll withholding taxes in connection with the vesting of restricted stock awards and shares used by employees to cover the exercise price of certain stock options that were exercised.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

8. EARNINGS PER SHARE

The following is a reconciliation of the income and share data used in the basic and diluted earnings per share computations for the periods presented:

	Three Months Ended March 31,
(in millions, except per share amounts)	2016			2015
Basic and Diluted
Net income, as reported	$	691		$	833
Participating share-based awards — allocated income	(5		)	(6		)
Net income available to common shareholders — basic and diluted	$	686		$	827
Common Shares
Basic
Weighted average shares outstanding	294.2			320.8
Diluted
Weighted average shares outstanding	294.2			320.8
Weighted average effects of dilutive securities — stock options and performance shares	3.7			3.7
Total	297.9			324.5
Net Income per Common Share
Basic	$	2.33		$	2.58
Diluted	$	2.30		$	2.55

9. SHARE-BASED INCENTIVE COMPENSATION

The following information relates to fully vested stock option awards at March 31, 2016:

Stock Options	Number	Weighted Average Exercise Price		Weighted Average Contractual Life Remaining	Aggregate Intrinsic Value ($in millions)
Vested at end of period (1)	8,773,891	$	77.11	6.6 Years	$	347
Exercisable at end of period	5,158,324	$	61.95	4.9 Years	$	282

(1) Represents awards for which the requisite service has been rendered, including those that are retirement eligible.

The total compensation cost for all share-based incentive compensation awards recognized in earnings was $50 million and $47 million for the three months ended March 31, 2016 and 2015, respectively. The related tax benefits recognized in earnings were $17 million and $16 million for the three months ended March 31, 2016 and 2015, respectively.

The total unrecognized compensation cost related to all nonvested share-based incentive compensation awards at March 31, 2016 was $215 million, which is expected to be recognized over a weighted-average period of 2.2 years. The total unrecognized compensation cost related to all nonvested share-based incentive compensation awards at December 31, 2015 was $124 million, which was expected to be recognized over a weighted-average period of 1.7 years.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

10. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS

The following table summarizes the components of net periodic benefit cost for the Company’s pension and postretirement benefit plans recognized in the consolidated statement of income.

(for the three months ended March 31, in millions)	Pension Plans						Postretirement Benefit Plans
	2016			2015			2016		2015
Net Periodic Benefit Cost:
Service cost	$	29		$	33		$	—	$	—
Interest cost on benefit obligation	30			36			2		3
Expected return on plan assets	(57		)	(58		)	—		—