Travelers Reports Excellent First Quarter Results, Including Strong Earnings and Premium Growth

First Quarter 2022 Net Income per Diluted Share of $4.15, up 45%, and Return on Equity of 15.0%

First Quarter 2022 Core Income per Diluted Share of $4.22, up 55%, and Core Return on Equity of 15.5%

Board of Directors Declares 6% Increase in Regular Quarterly Cash Dividend to $0.93 per Share

• First quarter net income of $1.018 billion and core income of $1.037 billion.
• Consolidated combined ratio of 91.3% and underlying combined ratio of 91.2%.
• Record net written premiums of $8.367 billion, up 11% compared to the prior year quarter.
• Net written premium growth in all three segments compared to the prior year quarter; Business Insurance up 9%, Bond & Specialty Insurance up 22% and Personal Insurance up 12%.
• Total capital returned to shareholders of $773 million, including $559 million of share repurchases.
• Book value per share of $106.40, down 5% from March 31, 2021; adjusted book value per share of $112.19, up 11% from March 31, 2021.

The Travelers Companies, Inc. today reported net income of $1.018 billion, or $4.15 per diluted share, for the quarter ended March 31, 2022, compared to $733 million, or $2.87 per diluted share, in the prior year quarter. Core income in the current quarter was $1.037 billion, or $4.22 per diluted share, compared to $699 million, or $2.73 per diluted share, in the prior year quarter. Core income increased primarily due to lower catastrophe losses, partially offset by lower net favorable prior year reserve development and lower net investment income. Net realized investment losses in the current quarter were $23 million pre-tax ($19 million after-tax), compared to net realized investment gains of $44 million pre-tax ($34 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.

“We are off to a terrific start in 2022, with strong contributions to our results from both underwriting and investments,” said Alan Schnitzer, Chairman and Chief Executive Officer. “Core income for the quarter was $1.0 billion, or $4.22 per diluted share, generating core return on equity of 15.5%. These results were driven by net earned premiums of $8.0 billion, which were 9% higher than in the prior year period, and an excellent combined ratio of 91.3%. Underlying underwriting income in our commercial business segments was particularly strong. Our high-quality investment portfolio generated after-tax net investment income of $539 million.

“These results, along with our strong balance sheet, enabled us to return $773 million of excess capital to our shareholders this quarter, including nearly $560 million of share repurchases. In recognition of our strong financial position and confidence in the outlook for our business, I am pleased to share that our Board of Directors declared a 6% increase in our quarterly cash dividend to $0.93 per share, marking 18 consecutive years of dividend increases with a compound annual growth rate of 9% over that period.

“Our best-in-class marketplace execution produced 11% growth in net written premiums this quarter to a record $8.4 billion, with each of our three segments contributing. In Business Insurance, net written premiums grew by 9%, with renewal premium change of 9.1%, near all-time highs, and record retention of 87%. In addition, new business was up 17% year over year. In Bond & Specialty Insurance, net written premiums increased by 22%, driven by renewal premium change of 12.0%, continued strong retention and 12% growth in new business in our management liability business, as well as terrific production in our surety business. In Personal Insurance, renewal premium change was higher in both Auto and Homeowners, contributing to net written premium growth of 12%.

“The significant innovation and technology investments we have been making for some time are driving our performance today and transforming Travelers into the insurance company of the future. We are innovating on top of a foundation of excellence to ensure our continued success through competitive advantages that are relevant, differentiating and difficult to replicate. With that and our talent advantage, we are confident in our ability to continue to create shareholder value over time.”

First Quarter 2022 Results

(All comparisons vs. first quarter 2021, unless noted otherwise)

Net income of $1.018 billion increased $285 million, due to higher core income, partially offset by net realized investment losses compared to net realized investment gains in the prior year quarter. Core income of $1.037 billion increased $338 million, primarily due to lower catastrophe losses, partially offset by lower net favorable prior year reserve development and lower net investment income. The underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses) benefited from higher business volumes and a $47 million benefit relating to the resolution of prior year income tax matters. Net realized investment losses were $23 million pre-tax ($19 million after-tax), compared to net realized investment gains of $44 million pre-tax ($34 million after-tax) in the prior year quarter.

Combined ratio:

• The combined ratio of 91.3% improved 5.3 points due to lower catastrophe losses (9.3 points), partially offset by lower net favorable prior year reserve development (2.3 points) and a higher underlying combined ratio (1.7 points).

• The underlying combined ratio of 91.2% increased 1.7 points. See below for further details by segment.

• Net favorable prior year reserve development occurred in all three segments. See below for further details by segment. Catastrophe losses primarily resulted from wind storms in multiple states.

Net investment income of $637 million pre-tax ($539 million after-tax) decreased 9%. Income from the non-fixed income investment portfolio decreased from the prior year quarter, primarily due to lower private equity partnership returns as compared to very strong returns in the prior year quarter. 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 over the prior year quarter, primarily due to growth in fixed maturity investments, partially offset by lower interest rates.

Net written premiums of $8.367 billion increased 11%. See below for further details by segment.

Shareholders’ Equity

Shareholders’ equity of $25.531 billion decreased 12% from year-end 2021, primarily due to net unrealized investment losses compared to net unrealized investment gains at year-end 2021, resulting from higher interest rates, common share repurchases and dividends to shareholders, partially offset by net income of $1.018 billion. Net unrealized investment losses included in shareholders’ equity were $1.770 billion pre-tax ($1.391 billion after-tax) compared to net unrealized investment gains of $3.060 billion pre-tax ($2.415 billion after-tax) at year-end 2021. Book value per share of $106.40 decreased 5% from March 31, 2021 and decreased 11% from year-end 2021. Adjusted book value per share of $112.19, which excludes net unrealized investment gains (losses), increased 11% over March 31, 2021 and 2% over year-end 2021.

The Company repurchased 3.3 million shares during the first quarter at an average price of $172.07 per share for a total of $559 million. At March 31, 2022, the Company had $3.505 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 $24.168 billion, and the ratio of debt-to-capital was 22.2%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains (losses) included in shareholders’ equity was 21.3%, within the Company’s target range of 15% to 25%.

The Board of Directors declared a 6% increase in the regular quarterly dividend to $0.93 per share. The dividend is payable on June 30, 2022 to shareholders of record at the close of business on June 10, 2022.

First Quarter 2022 Results

(All comparisons vs. first quarter 2021, unless noted otherwise)

Segment income for Business Insurance was $669 million after-tax, an increase of $352 million. Segment income increased primarily due to lower catastrophe losses and also a higher underlying underwriting gain, partially offset by lower net investment income and lower net favorable prior year reserve development. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

• The combined ratio of 90.9% improved 12.6 points due to lower catastrophe losses (11.4 points) and a lower underlying combined ratio (1.9 points), partially offset by lower net favorable prior year reserve development (0.7 points).

• The underlying combined ratio of 91.8% improved 1.9 points, reflecting improvements of 0.8 points in the loss ratio and 1.1 points in the expense ratio.

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

Net written premiums of $4.502 billion increased 9%, reflecting strong renewal premium change and retention, as well as higher levels of new business.

First Quarter 2022 Results

(All comparisons vs. first quarter 2021, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $217 million after-tax, an increase of $80 million. Segment income increased primarily due to a higher underlying underwriting gain, lower catastrophe losses and higher net favorable prior year reserve development. The underlying underwriting gain benefited from higher business volumes. The current quarter also benefited by $24 million relating to the resolution of prior year income tax matters.

Combined ratio:

• The combined ratio of 78.0% improved 7.2 points due to lower catastrophe losses (3.0 points), higher net favorable prior year reserve development (2.2 points) and a lower underlying combined ratio (2.0 points).

• The underlying combined ratio improved by 2.0 points to a very strong 82.2%.

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

Net written premiums of $882 million increased 22%, reflecting strong renewal premium change, retention and new business in management liability and strong production in surety.

First Quarter 2022 Results

(All comparisons vs. first quarter 2021, unless noted otherwise)

Segment income for Personal Insurance was $225 million after-tax, a decrease of $89 million. Segment income decreased primarily due to a lower underlying underwriting gain and lower net favorable prior year reserve development, partially offset by lower catastrophe losses. The underlying underwriting gain benefited from higher business volumes. The current quarter also benefited by $20 million relating to the resolution of prior year income tax matters.

Combined ratio:

• The combined ratio of 95.3% increased 5.0 points due to a higher underlying combined ratio (7.4 points) and lower net favorable prior year reserve development (5.8 points), partially offset by lower catastrophe losses (8.2 points).

• The underlying combined ratio of 92.8% increased 7.4 points, driven primarily by a comparison to a low level of loss activity in the prior year quarter in the automobile product line and elevated severity in the current quarter in both the automobile and homeowners and other product lines, partially offset by a lower expense ratio.

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

Net written premiums of $2.983 billion increased 12%. Domestic Automobile net written premiums increased 9%, driven by strong retention and renewal premium change of 3.1%. Domestic Homeowners and Other net written premiums increased 17%, driven by strong retention and renewal premium change of 12.3%.

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 Tuesday, April 19, 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 1450817.

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.

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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;
• future pension plan contributions;
• 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 and modeling;
• the impact of investment, economic and underwriting market conditions, including interest rates and inflation;
• the impact of changing climate conditions;
• strategic and operational initiatives to improve profitability and competitiveness;
• the Company’s competitive advantages and innovation agenda;
• new product offerings;
• the impact of developments in the tort environment; and
• the impact of developments in the geopolitical environment.

The Company cautions investors that such statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond the Company’s control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

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, including increased inflation;
• 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 ongoing 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;
• the intense competition that the Company faces, including with respect to attracting and retaining employees, 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 or services, 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 (the risk of which could be exacerbated by geopolitical tensions) 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 appropriate for the Company’s business operations, 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.

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 April 19, 2022, and in our most recent annual report on Form 10-K filed with the SEC on February 17, 2022, 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.

(1) Impact is recognized in the accounting period in which the change is enacted

(2) 2017 reflects impact of Tax Cuts and Jobs Act of 2017 (TCJA)

RECONCILIATION OF SHAREHOLDERS’ EQUITY TO ADJUSTED SHAREHOLDERS’ EQUITY AND CALCULATION OF RETURN ON EQUITY AND CORE RETURN ON EQUITY

Adjusted shareholders’ equity is shareholders’ equity excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity, net realized investment gains (losses), net of tax, for the period presented, the effect of a change in tax laws and tax rates at enactment (excluding the portion related to net unrealized investment gains (losses)), preferred stock and discontinued operations.

(1) Impact is recognized in the accounting period in which the change is enacted

(2) 2017 reflects impact of Tax Cuts and Jobs Act of 2017 (TCJA)

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

Average shareholders’ equity is (a) the sum of total shareholders’ equity excluding preferred stock at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two. Adjusted average shareholders’ equity is (a) the sum of total adjusted shareholders’ equity at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.

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

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

A catastrophe is a severe loss designated a catastrophe by internationally recognized organizations that track and report on insured losses resulting from catastrophic events, such as Property Claim Services (PCS) for events in the United States and Canada. Catastrophes can be caused by various natural events, including, among others, hurricanes, tornadoes and other windstorms, earthquakes, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions and other naturally-occurring events, such as solar flares. Catastrophes can also be man-made, such as terrorist attacks and other intentionally destructive acts including those involving nuclear, biological, chemical and radiological events, cyber events, explosions and destruction of infrastructure. Each catastrophe has unique characteristics and catastrophes are not predictable as to timing or amount. Their effects are included in net and core income and claims and claim adjustment expense reserves upon occurrence. A catastrophe may result in the payment of reinsurance reinstatement premiums and assessments from various pools.

The Company’s threshold for disclosing catastrophes is primarily determined at the reportable segment level. If a threshold for one segment or a combination thereof is exceeded and the other segments have losses from the same event, losses from the event are identified as catastrophe losses in the segment results and for the consolidated results of the Company. Additionally, an aggregate threshold is applied for international business across all reportable segments. The threshold for 2022 ranges from $20 million to $30 million of losses before reinsurance and taxes.

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

(1) Impact is recognized in the accounting period in which the change is enacted

(2) 2017 reflects impact of Tax Cuts and Jobs Act of 2017 (TCJA)

COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED RATIO

Combined ratio: For Statutory Accounting Practices (SAP), the combined ratio is the sum of the SAP loss and LAE ratio and the SAP underwriting expense ratio as defined in the statutory financial statements required by insurance regulators. The combined ratio, as used in this earnings release, is the equivalent of, and is calculated in the same manner as, the SAP combined ratio except that the SAP underwriting expense ratio is based on net written premiums and the underwriting expense ratio as used in this earnings release is based on net earned premiums.

For SAP, the loss and LAE ratio is the ratio of incurred losses and loss adjustment expenses less certain administrative services fee income to net earned premiums as defined in the statutory financial statements required by insurance regulators. The loss and LAE ratio as used in this earnings release is calculated in the same manner as the SAP ratio.

For SAP, the underwriting expense ratio is the ratio of underwriting expenses incurred (including commissions paid), less certain administrative services fee income and billing and policy fees and other, to net written premiums as defined in the statutory financial statements required by insurance regulators. The underwriting expense ratio as used in this earnings release, is the ratio of underwriting expenses (including the amortization of deferred acquisition costs), less certain administrative services fee income, billing and policy fees and other, to net earned premiums.

The combined ratio, loss and LAE ratio, and underwriting expense ratio are used as indicators of the Company’s underwriting discipline, efficiency in acquiring and servicing its business and overall underwriting profitability. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.

Underlying combined ratio represents the combined ratio excluding the impact of net prior year reserve development and catastrophes. The underlying combined ratio is an indicator of the Company’s underwriting discipline and underwriting profitability for the current accident year.

Other companies’ method of computing similarly titled measures may not be comparable to the Company’s method of computing these ratios.