Accordingly, our investment portfolio is positioned to meet our obligations to policyholders under almost every foreseeable circumstance — anything from a financial crisis to a global pandemic to a significant natural disaster. With this in mind, we are focused on risk-adjusted returns and credit quality rather than reaching for yield that is not commensurate with the underlying risk.

Our well-defined and consistent investment portfolio has been a meaningful and reliable contributor to our results, year in and year out. This is exactly what we saw in 2025. Net investment income increased by more than 10% to $3.3 billion after-tax.

Net investment income benefited from very strong top-line growth and record cash flow from operations, as well as higher long-term average yields. Notably, for the first time, total invested assets surpassed $100 billion. For 2026, we expect to earn approximately $3.3 billion after-tax from our fixed income portfolio alone, our highest level ever.

In that regard, our culture alone is a significant and sustainable competitive advantage. In our commercial businesses, that means granular execution on an account-by-account or class-by-class basis. In personal lines, it means a very high degree of segmentation by risk profile, product and geography. With that and our advanced analytical capabilities, we thoughtfully select the risks that we write and price our products deliberately with our target return in mind.

Like every aspect of our business, our focus on performance over time is core to how we manage our catastrophe exposure. Although we are unable to predict what the next event will be or where it will occur, we take steps every day to ensure that our portfolio of risk properly contemplates the potential for loss and that we maintain the right balance of risk and reward.

Due to our disciplined approach to catastrophe management, our share of catastrophe losses over time has been significantly favorable relative to our market share. This outperformance is the result of our prudent and integrated approach to managing our catastrophe exposures through portfolio, risk selection, underwriting and pricing actions.

We continue to make significant investments in advanced capabilities to ensure that our catastrophe management teams and underwriters have the tools and insights necessary to develop a comprehensive view of catastrophe risk. We believe that these investments position Travelers to continue to outperform.

Another pillar of our underwriting strength is a deliberate approach to reinsurance. The quality of our underwriting and the diversification of our business allow us to seek to optimize the portion of our business that we cede to reinsurers. While reinsurance remains an important tool for managing balance sheet risk and volatility, it comes at a cost, as reinsurers must earn an appropriate return on the capital they deploy.

With that in mind, we generally prefer to retain a high percentage of the economics of the business we write. Our deep expertise across the broad suite of products we offer, coupled with our scale and long-standing reputation for underwriting discipline, makes us a highly valued counterparty in the reinsurance market. That standing affords us flexibility. When market conditions are favorable, we have the ability to purchase added coverage on attractive terms. When they are not, we have the ability to retain more risk on our own balance sheet.

As just one example of the favorable terms we have been able to achieve on recent treaty placements, we just renewed our long-standing Catastrophe Excess-of-Loss Reinsurance Treaty, with a lower attachment point and only a modest increase to our total ceded premium costs. This treaty continues to provide coverage for both single catastrophe events and the aggregation of losses from multiple catastrophe events, and the per occurrence loss deductible remains unchanged at $100 million.

The rates at which claimants choose to be represented by attorneys have climbed significantly. Nuclear verdicts have become more frequent and more severe. Third-party litigation finance has become a significant asset class. Inflation surged unexpectedly in the post-COVID period. And emerging liabilities have reshaped the industry’s loss landscape — from changes in laws allowing the revival of previously time-barred claims to mass tort actions relating to opioids, PFAS, talc and more.

Through all of these developments, our balance sheet has remained strong. In 19 of the past 20 years, we have recorded net favorable prior year reserve development totaling more than $14 billion, all while navigating these shifts in the liability environment. That is not an accident. It is the result of a consistent, disciplined culture — one that has a healthy respect for uncertainty and a commitment to responding appropriately to emerging data.

Ultimately, what gives me confidence in our reserve position is not just the output of our models — it is the people and the processes behind them. Business leaders, underwriters, actuaries, finance leaders and Claim professionals sit together and rigorously examine the data, challenge assumptions and test conclusions. That culture of individual and collective accountability and disciplined analysis has allowed Travelers to consistently recognize and respond to trends earlier than most in our industry.

An early and accurate view of the loss environment is not just a balance sheet exercise — it is a competitive advantage. It gives us an edge in risk selection, pricing segmentation and claim strategy, and it will continue to differentiate us in the years ahead.

This commitment to claim excellence sets us apart, particularly in a year like 2025, when industrywide catastrophe losses were again at elevated levels.

Our objective is to close 90% of property claims arising out of catastrophe events within 30 days. In practice, that means our Claim team — some 12,000 strong — gets to work often before disaster strikes and well before the skies clear, the wind dies down or firefighters finish their work.

That includes using aerial imagery to identify locations with likely losses, assess the degree of damage and deploy claim resources — sometimes even before our customers have had a chance to return to their homes. Sharing this information and getting to work early enable them to begin the recovery process sooner.

For us, a speedy and compassionate response is the baseline. It means the world to our customers, as reflected in both satisfaction and retention. It is also good business: responding quickly helps reduce claim severity and strengthen the long-term value of our franchise.

Core to this strategy is executing on our ambitious innovation agenda to leverage those forces of change. As they have evolved around us, we have methodically, iteratively and deliberately evolved our strategy.

Strong underwriting is the flywheel that sets it all in motion. Thanks to a strong value proposition, highly effective marketplace execution and strategic innovation, we have profitably grown our premium base by nearly 80% since 2016, from $25 billion to more than $44 billion today. Our reported and underlying profitability significantly strengthened over that period of time.

Our growth has been largely organic, from products in which we have deep expertise, through distribution partners with whom we have long-standing relationships and in geographies where we have a thorough understanding of the regulatory environment and other market dynamics — in other words, a relatively low-risk growth strategy. As we have grown our business, we have also successfully executed on our strategic initiative to improve productivity and efficiency.

The successful execution of this strategy has led to significantly higher underlying underwriting income, meaningfully higher cash flow from operations and growth in our investment portfolio.

The tremendous strength and relative predictability of our underlying underwriting income have increasingly contributed to our bottom line. Our 2025 underlying underwriting income of $5.5 billion after-tax is more than four times the level it was a decade ago.

Our growth in underwriting income also contributes to the increase in our cash flow from operations. Over the past decade, we have steadily increased our annual cash flow from operations from $4.5 billion in 2016 to a record $10.6 billion in 2025. Cash flow is what enables us to make strategic investments in our business, return excess capital to shareholders and grow our investment portfolio. During this period, we invested approximately $14 billion in technology (with a steadily increasing allocation to important strategic initiatives), returned approximately $26 billion of excess capital to our shareholders and grew our investment portfolio to more than $100 billion. Importantly, our growing investment portfolio positions us to continue generating a higher level of predictable and reliable net investment income.

The charts below illustrate the power of our strategy at work and its compounding, multiyear benefit.

Over the past decade, we have developed the competitive advantage of an innovation skill set. Now, we are bringing all that hard-won know-how to Innovation 2.0 at Travelers.

The P&C industry is well positioned to benefit from AI across the entire value chain. This generation of AI can understand and execute on the complex stakeholder interactions, well-defined processes, data-intensive workflows and massive amounts of unstructured data that characterize our industry. The gains compound over many, many interactions. In that context, Travelers is particularly well positioned. As an industry leader, we bring differentiating domain expertise. Because AI amplifies existing strength, leaders in the domain are best positioned to use it to drive improvement.

In addition, we have decades of high-quality data from millions of transactions and interactions and the scale to invest at significant levels as AI and technology continue to segment the market. We have thousands of engineers, data scientists and analysts building AI and other sophisticated technology solutions. Dozens of generative AI tools are already in production. Millions of transactions are now automated. More than 20,000 of our colleagues use AI tools on a regular basis, and agentic AI is not a future aspiration, it is embedded in our business operations today.

As just one example, we recently announced an initiative to empower 10,000 of our engineers, data scientists, analysts and product owners with personalized context-aware and integrated AI assistants. This initiative will enhance and accelerate the development of software, analytics and predictive models. In extensive testing, we achieved significantly improved engineering output and meaningful productivity gains. We expect that this will result in faster and more cost-effective delivery of new capabilities across Travelers. It will improve everything from product development to new business prospecting, underwriting speed and quality, the agent and customer experience, and more.

In our Claim organization, more than half of all claims are now eligible for straight-through digital processing, with customers adopting straight-through processing about two-thirds of the time. Another 15% of all claims are processed with advanced digital tools. All of those percentages are growing. To accommodate customers who still prefer to call in to report a claim, we recently launched a natural language generative AI voice agent that takes first notice of loss by phone. This capability is initially being used with customers who are calling to file an auto damage claim and will expand to additional lines of business and a broader set of claim interactions. Early customer adoption has exceeded our expectations, and early customer feedback has been overwhelmingly positive.

The results are tangible. In our Claim organization, the investments we have made, including in automation, straight-through processing and analytics, are leading to improved customer experience, refined indemnity payouts and significant annual run rate cost savings.

And of course we are deploying AI broadly across the business. Other use cases enhance underwriting decision quality, improve efficiency and enrich the experience for customers, agents, brokers and employees. We are still early in this transformation, which means that the benefits, more effective underwriting, improved operating leverage and profitable growth, will continue to build.

During this period, we have also returned a significant amount of excess capital to you, our shareholders, through dividends and share repurchases. Over the last decade, we have increased our dividend each year.

Notably, since we began our share repurchase program in 2006, we have returned approximately $61 billion of excess capital to our shareholders, including through $45 billion of share repurchases — well in excess of the market capitalization of the company when we started. Just by virtue of our share repurchase program, your percentage ownership of Travelers increased 4% during 2025 alone. If you owned Travelers stock when we began our share repurchase program in 2006, your percentage ownership has more than tripled compared to your initial investment percentage. This increase is even higher if you participated in our dividend reinvestment program. Over this 20-year period, we have increased our dividend at an average annual rate of more than 8%.

Our capital management strategy has been an important driver of shareholder value creation. Our first objective for the capital we generate is to reinvest it in our business — organically and inorganically — to create shareholder value. For example, as we grow our top line, we will retain more capital to support that growth. Also, we continue to invest in everything from talent to technology to advance our strategic objectives and power tomorrow’s performance.

Having said that, we are disciplined stewards of our shareholders’ capital. To the extent that we generate capital that we cannot reinvest consistent with our objective of generating industry-leading returns over time, we will manage it in the same way we have for decades — by returning it to our shareholders through dividends and share repurchases.

By returning excess capital to our investors, we give them the ability to allocate their investment dollars as they see fit, including by investing in companies with different growth profiles or capital needs, thereby efficiently allocating capital across the economy. That efficient allocation of capital in the marketplace contributes to a stronger economy.

Our recent sale of our Canadian business for approximately $2.4 billion, or 1.8x book value, excluding excess local capital, and our repurchase of about $700 million of additional shares in the first quarter of 2026 with a portion of the net cash proceeds from that sale, demonstrate our disciplined approach to capital management.

The Canadian marketplace has evolved over the last decade or so in a few significant ways such that the outlook for our Canadian business relative to our other businesses, combined with a very attractive offer from a strategic buyer, made reallocating the capital the better decision. Disciplined capital management is not only about deciding how to deploy the marginal dollar — it is about continually and rigorously reassessing capital already deployed and whether it is still delivering the best long-term value.

We have a well-established track record of managing the company to create value over the long term, through periods of weather volatility; through anticipated and unanticipated developments impacting loss costs; through both foreseeable and unforeseeable economic cycles; and through any number of more extreme economic, geopolitical and other conditions. With that in mind, the graph below compares our total return to shareholders since the 2008 financial crisis to the returns for the Dow 30, the S&P 500 and the S&P 500 Financials.

Our total return reflects the successful execution of our long-term strategy. We provide our shareholders with industry-leading returns, growth in book value, low volatility and high credit quality. The success of this long-term strategy is evident in the strong performance of our stock over time. Viewing our performance through this long-term lens, we are as confident as ever that executing on our long-term financial strategy, managing Travelers with an over-time discipline and continuing to significantly invest in our competitive advantages is the right approach for building on Travelers’ outstanding record.