Travelers Reports Third Quarter Net Income per Diluted Share of $2.97, Up 10% from Prior Year Quarter

The Travelers Companies, Inc. today reported net income of $928 million, or $2.97 per diluted share, for the quarter ended September 30, 2015, compared to net income of $919 million, or $2.69 per diluted share, in the prior year quarter. Operating income in the current quarter was $918 million, or $2.93 per diluted share, compared to $893 million, or $2.61 per diluted share, in the prior year quarter. The increase in net and operating income primarily resulted from higher underlying underwriting gains (i.e., excluding net favorable prior year reserve development and catastrophe losses) and higher net favorable prior year reserve development, partially offset by lower net investment income. Per diluted share amounts also benefited from the impact of share repurchases.

“We are very pleased to report third quarter operating income of $918 million and operating return on equity of 16.2%,” commented Jay Fishman, Chairman and Chief Executive Officer. “At 86.9%, our combined ratio reflected very strong performance across all of our business segments. Our investment portfolio continued to deliver solid returns in the continuing low interest rate environment. We also returned $939 million in capital to shareholders in the quarter, including $750 million in share repurchases, bringing the total capital returned to shareholders year to date to over $2.7 billion.

“Each of our business segments performed well in the quarter. In Business and International Insurance, the combined ratio improved to 92.2%, and retention remained at historically high levels. Bond & Specialty Insurance delivered very strong results, with a 57.1% combined ratio, as well as higher retention and new business volume in Management Liability. Personal Insurance also posted very strong results, delivering a combined ratio of 85.1% and net written premium growth of 6%. Notably, Agency Auto achieved growth in both net written premiums and policies in force of 10% and 6%, respectively.

“These results continue to build on our record of delivering superior returns over time. Since January 1, 2005, we have produced an average annual operating return on equity of 13.4%. With our meaningful competitive advantages, as well as our commitment to our proven investment and capital management strategies, we remain well positioned to continue to deliver on our long-term financial objectives.”

Third Quarter 2015 Results

(All comparisons vs. third quarter 2014, unless noted otherwise)

Net income of $928 million after-tax and operating income of $918 million after-tax increased $9 million and $25 million, respectively, primarily driven by a higher underlying underwriting gain and higher net favorable prior year reserve development, partially offset by lower net investment income.

Underwriting results

• The combined ratio improved 3.1 points to 86.9% due to a lower underlying combined ratio (1.7 points) and higher net favorable prior year reserve development (1.4 points).
• The underlying combined ratio remained strong and improved 1.7 points to 88.8%, primarily driven by lower non-catastrophe weather-related losses in Business and International Insurance.
• Net favorable prior year reserve development occurred in all segments. Catastrophe losses primarily resulted from wildfires in California, as well as wind and hail storms in the Midwest region of the United States.

Net investment income of $614 million pre-tax ($484 million after-tax) decreased primarily due to lower returns in both the non-fixed income and fixed income portfolios. Non-fixed income returns remained strong, but declined as compared to a particularly high level in the prior year quarter. Fixed income returns declined primarily due to lower reinvestment rates and a modestly lower amount of fixed income investments that were impacted by the Company’s $579 million payment in the first quarter of 2015 related to the settlement of the Asbestos Direct Action Litigation.

Net written premiums of $6.191 billion increased 3% from the prior year quarter, benefiting from strong retention and positive renewal premium changes in each business segment, as well as higher new business volume in Personal Insurance. Net written premiums also benefited from the impact of changes in the timing and structure of certain of the Company’s reinsurance treaties that occurred in prior quarters, partially offset by the impact of changes in foreign currency exchange rates.

Year-to-Date 2015 Results

(All comparisons vs. year-to-date 2014, unless noted otherwise)

Net income of $2.573 billion after-tax and operating income of $2.551 billion after-tax decreased $81 million and $67 million, respectively, primarily driven by lower net investment income, partially offset by a higher underwriting gain. The increase in the underwriting gain was primarily due to lower catastrophe losses, higher net favorable prior year reserve development and a $32 million benefit from the resolution of prior year tax matters. The underwriting gain in the prior year period benefited from a $49 million after-tax ($76 million pre-tax) reduction in the estimated liability for state assessments to be paid by the Company related to workers’ compensation premiums due to a change in state law.

Underwriting results

• The combined ratio improved 1.4 points to 88.9% due to lower catastrophe losses (1.1 points) and higher net favorable prior year reserve development (0.3 points).
• The underlying combined ratio of 89.9% remained strong and was comparable to the prior year period.
• Net favorable prior year reserve development occurred in all segments. Catastrophe losses included the third quarter 2015 events discussed above, as well as wind and hail storms in several regions of the United States in the second quarter of 2015 and a winter storm in the eastern United States in the first quarter of 2015.

Net investment income of $1.838 billion pre-tax ($1.465 billion after-tax) decreased primarily due to the same factors discussed above for the third quarter of 2015.

Net written premiums of $18.257 billion increased 1% from the prior year period, benefiting from strong retention and positive renewal premium changes in each business segment, as well as higher new business volume in Personal Insurance, partially offset by the impact of changes in foreign currency exchange rates.

Shareholders’ Equity

Shareholders’ equity of $24.033 billion decreased 3% from year-end 2014 due to a reduction in after-tax net unrealized investment gains and an increase in after-tax unrealized foreign currency translation losses. After-tax net unrealized investment gains were $1.414 billion, compared to $1.966 billion at year-end 2014. Book value per share of $79.00 and adjusted book value per share of $74.35 increased 2% and 5%, respectively, from year-end 2014.

The Company repurchased 7.3 million shares during the third quarter and 21.5 million shares year-to-date at a total cost of $750 million and $2.223 billion, respectively, leaving $4.334 billion of remaining capacity under its existing share repurchase authorization at the end of the quarter. Also as of the end of the quarter, statutory capital and surplus was $20.822 billion and the ratio of debt-to-capital (excluding after-tax net unrealized investment gains) was 23.0%, comfortably within the Company’s target range of 15% to 25%.

The Board of Directors today declared a quarterly dividend of $0.61 per share. This dividend is payable on December 31, 2015, to shareholders of record as of the close of business on December 10, 2015.

Third Quarter 2015 Results

(All comparisons vs. third quarter 2014, unless noted otherwise)

Business and International Insurance had another strong quarter with operating income of $546 million after-tax and a combined ratio of 92.2%. Operating income decreased $6 million due to lower net investment income, mostly offset by a higher underlying underwriting gain and higher net favorable prior year reserve development.

Underwriting results

• The combined ratio improved 3.0 points to 92.2%, due to a lower underlying combined ratio (2.4 points) and higher net favorable prior year reserve development (0.8 points), partially offset by higher catastrophe losses (0.2 points).
• The underlying combined ratio remained strong and improved 2.4 points to 92.5% driven by lower non-catastrophe weather-related losses.
• Net favorable prior year reserve development primarily resulted from (i) better than expected loss experience for the property product line related to catastrophe losses for accident years 2011, 2012 and 2014 and non-catastrophe losses for accident years 2013 and 2014, (ii) better than expected loss experience in the general liability product line for both primary and excess coverages for accident years 2005 through 2013, reflecting a more favorable legal environment than the Company previously expected, (iii) better than expected loss experience in the workers’ compensation product line for accident years 2005 and prior and (iv) better than expected loss experience in the Company’s operations in Canada, partially offset by (v) a $224 million pre-tax increase to asbestos reserves.

• The asbestos reserve strengthening, which resulted from our annual in-depth asbestos claim review that was completed in the third quarter, was driven by increases in the Company’s estimate for projected settlement and defense costs related to a broad number of policyholders. The increase in the estimate of projected settlement and defense costs resulted from recent payment trends that continue to be higher than previously anticipated. While the overall view of the underlying asbestos environment is essentially unchanged from recent periods, there remains a high degree of uncertainty with respect to future exposure to asbestos claims.

Net written premiums increased 1% to $3.590 billion. Domestic net written premiums increased 4% driven by an increase in retention rates, positive renewal premium changes and the impact of changes in the timing and structure of certain of the Company’s reinsurance treaties that occurred in prior quarters. International net written premiums decreased 19% primarily due to the impact of changes in foreign currency exchange rates and lower business volume in the Company’s operations at Lloyd’s.

Year-to-Date 2015 Results

(All comparisons vs. year-to-date 2014, unless noted otherwise)

Business and International Insurance operating income of $1.604 billion after-tax was strong and decreased $113 million, primarily due to lower net investment income, partially offset by a higher underwriting gain. The underwriting gain increased due to lower catastrophe losses, higher net favorable prior year reserve development and a $12 million benefit from the resolution of prior year tax matters. The underwriting gain in the prior year period benefited from a $49 million after-tax ($76 million pre-tax) reduction in the estimated liability for state assessments to be paid by the Company related to workers’ compensation premiums due to a change in state law.

Underwriting results

• The combined ratio improved 1.3 points to 92.9%, due to lower catastrophe losses (1.1 points) and higher net favorable prior year reserve development (0.6 points), partially offset by a higher underlying combined ratio (0.4 points).
• The underlying combined ratio remained strong at 92.8%, an increase of 0.4 points.
• Net favorable prior year reserve development primarily resulted from (i) better than expected loss experience in the general liability product line, for both primary and excess coverages for accident years 2005 through 2013, reflecting a more favorable legal environment than the Company previously expected, (ii) better than expected loss experience for the property product line related to catastrophe losses for accident years 2011, 2012 and 2014 and non-catastrophe losses for accident years 2013 and 2014, (iii) better than expected loss experience in the workers’ compensation line of business for accident years 2006 and prior and (iv) better than expected loss experience in the Company’s operations at Lloyd’s and in Canada, partially offset by (v) a $224 million pre-tax increase to asbestos reserves and (vi) a $72 million pre-tax increase to environmental reserves.

Net written premiums of $11.066 billion were comparable to the prior year period. Domestic net written premiums increased 2% driven by an increase in retention rates, positive renewal premium changes and an increase in new business. International net written premiums decreased 14% primarily due to the impact of changes in foreign currency exchange rates.

Third Quarter 2015 Results

(All comparisons vs. third quarter 2014, unless noted otherwise)

Bond & Specialty Insurance had another excellent quarter with operating income of $196 million after-tax and a combined ratio of 57.1%. Operating income increased $31 million due to a higher underlying underwriting gain and higher net favorable prior year reserve development.

Underwriting results

• The combined ratio was very strong at 57.1% and improved 9.8 points, primarily due to a lower underlying combined ratio (5.6 pts) and higher net favorable prior year reserve development (4.1 points).
• The underlying combined ratio was very strong at 76.1% and improved 5.6 points primarily due to a re-estimation of current accident year losses in certain management liability businesses and the impact of certain customer-related intangible assets which became fully amortized during the second quarter of 2015.
• Net favorable prior year reserve development primarily resulted from better than expected loss experience in the contract surety and fidelity product lines for accident years 2008 through 2013.

Bond & Specialty Insurance net written premiums increased slightly to $565 million driven by higher volume in Surety.

Year-to-Date 2015 Results

(All comparisons vs. year-to-date 2014, unless noted otherwise)

Bond & Specialty Insurance performed very well in the period with operating income of $471 million after-tax and a combined ratio of 68.8%. Operating income decreased by $40 million due to lower net favorable prior year reserve development and lower net investment income, partially offset by a higher underlying underwriting gain and a $16 million benefit from the resolution of prior year tax matters.

Underwriting results

• The combined ratio was very strong at 68.8% and increased 4.2 points, primarily due to lower net favorable prior year reserve development (6.0 points), partially offset by a lower underlying combined ratio (1.5 points).
• The underlying combined ratio of 80.0% was strong and improved 1.5 points due to the same factors discussed above for the third quarter of 2015.
• Net favorable prior year reserve development primarily resulted from the same factors discussed above for the third quarter of 2015.

Bond & Specialty Insurance net written premiums of $1.577 billion were comparable to the prior year period.

Third Quarter 2015 Results

(All comparisons vs. third quarter 2014, unless noted otherwise)

Personal Insurance performed well in the quarter with a combined ratio of 85.1% and an increase in net written premiums of 6%. Operating income of $241 million after-tax increased $2 million, primarily driven by higher net favorable prior year reserve development and lower catastrophe losses, partially offset by lower net investment income and a lower underlying underwriting gain.

Underwriting results

• The combined ratio improved 1.0 points to 85.1%, due to higher net favorable prior year reserve development (1.9 points) and lower catastrophe losses (0.3 points), partially offset by a higher underlying combined ratio (1.2 points).
• The underlying combined ratio remained strong at 85.2%, an increase of 1.2 points, primarily due to higher non-weather-related losses in Homeowners & Other, partially offset by a lower expense ratio.
• Net favorable prior year reserve development primarily resulted from (i) better than expected loss experience in the homeowners and other product line for liability coverages for accident years 2013 and 2014 and (ii) better than expected loss experience in the automobile product line for liability coverages for accident years 2012 through 2014.

Personal Insurance net written premiums of $2.036 billion increased 6%. Agency Automobile net written premiums grew 10% with an increase in policies in force of 6% from the prior year quarter, driven by Quantum 2.0. Agency Homeowners & Other net written premiums grew by 2% primarily driven by the changes in the timing and structure of certain of the Company’s reinsurance treaties that occurred in prior quarters and higher new business volume. Agency Homeowners & Other policies in force were comparable to the previous quarter.

Year-to-Date 2015 Results

(All comparisons vs. year-to-date 2014, unless noted otherwise)

Personal Insurance performed well in the period as operating income of $667 million after-tax increased $85 million. The increase was primarily driven by a higher underwriting gain and a $4 million benefit from the resolution of prior year tax matters, partially offset by lower net investment income and lower other income.

Underwriting results

• The combined ratio improved 3.2 points to 86.6%, due to higher net favorable prior year reserve development (1.6 points), lower catastrophe losses (1.5 points) and a lower underlying combined ratio (0.1 points).
• The underlying combined ratio remained strong at 87.0%.
• Net favorable prior year reserve development primarily resulted from (i) better than expected loss experience in the homeowners and other product line for liability coverages for accident years 2011 through 2014, for non-catastrophe weather-related losses for accident years 2013 and 2014, and for non-weather-related losses for accident year 2014 and (ii) better than expected loss experience in the automobile product line for liability coverages for accident years 2010 through 2014.

Other income of $33 million pre-tax decreased primarily due to the inclusion in the prior year period of revenues associated with the runoff of the Company’s National Flood Insurance Program which was sold on a renewal rights basis in 2013.

Personal Insurance net written premiums of $5.614 billion increased 3%. Agency Automobile net written premiums increased 7% due to higher new business volume, driven by Quantum 2.0, while Agency Homeowners & Other net written premiums decreased 1%.

Financial Supplement and Conference Call

The information in this press release should be read in conjunction with a 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, October 20, 2015. Investors can access the call via webcast at http://investor.travelers.com or by dialing 1-800-698-5986 within the U.S. and 1-303-223-4378 outside the U.S. (use passcode 14788 for both the U.S. and international calls). Prior to the webcast, a slide presentation pertaining to the quarterly earnings will be available on the Company’s website.

Following the live event, an audio playback of the webcast and the slide presentation will be available at the same website. An audio playback can also be accessed by phone at 1-800-633-8284 within the U.S. and 1-402-977-9140 outside the U.S. (use reservation 21775293 for both the U.S. and international calls).

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 $27 billion in 2014. For more information, visit www.travelers.com.

From time to time, 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 and International Insurance: The Business and International Insurance segment offers a broad array of property and casualty insurance and insurance related services to its clients, 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: The Bond & Specialty Insurance segment provides surety, crime, management and professional liability coverages and related risk management services to a wide range of primarily domestic customers, utilizing various degrees of financially-based underwriting approaches.

Personal Insurance: The Personal Insurance segment writes a broad range of property and casualty insurance covering individuals’ personal risks. 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,” “estimates” and similar expressions are used to identify these forward-looking statements. Specifically, statements about the Company’s outlook, share repurchase plans, potential margins, potential returns, future pension plan contributions and the potential impact of investment markets and other economic conditions on the Company’s investment portfolio and underwriting results, among others, are forward looking, and the Company may also make forward-looking statements about, among other things:

• its results of operations and financial condition (including, among other things, premium volume, premium rates, net and operating income, investment income and performance, loss costs, return on equity, and expected current returns and combined ratios);
• 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;
• the cost and availability of reinsurance coverage;
• catastrophe losses;
• the impact of investment, economic (including rapid changes in commodity prices, such as a significant decline in oil and gas prices, as well as fluctuations in foreign currency exchange rates) and underwriting market conditions; and
• strategic initiatives to improve profitability and competitiveness.

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:

• catastrophe losses could materially and adversely affect the Company’s results of operations, its financial position and/or liquidity, and could adversely impact the Company’s ratings, the Company’s ability to raise capital and the availability and cost of reinsurance;
• during or following a period of financial market disruption, economic downturn, or prolonged period of slow economic growth, the Company’s business could be materially and adversely affected;
• if actual claims exceed the Company’s claims and claim adjustment expense reserves, or if changes in the estimated level of claims and claim adjustment expense reserves are necessary, the Company’s financial results could be materially and adversely affected;
• the Company’s investment portfolio may suffer reduced or low returns or material realized or unrealized losses;
• the Company’s business could be harmed because of its potential exposure to asbestos and environmental claims and related litigation;
• the Company is exposed to, and may face adverse developments involving, mass tort claims such as those relating to exposure to potentially harmful products or substances;
• the effects of emerging claim and coverage issues on the Company’s business are uncertain;
• the intense competition that the Company faces could harm its ability to maintain or increase its business volume and its profitability;
• consolidation within the insurance industry, including among insurance companies, reinsurance companies and brokers and independent insurance agencies, could alter the competitive environment in which the Company operates, which may impact the Company’s premium volume, the rate it can charge for its products, and the terms on which its products are offered;
• the Company may not be able to collect all amounts due to it from reinsurers and reinsurance coverage may not be available to the Company in the future at commercially reasonable rates or at all;
• the Company is exposed to credit risk in certain of its business operations, including reinsurance or structured settlements, and investment operations;
• within the United States, the Company’s businesses are heavily regulated by the states in which it conducts business, including licensing and supervision, and changes in regulation may reduce the Company’s profitability and limit its growth;
• changes in federal regulation could impose significant burdens on the Company and otherwise adversely impact the Company’s results;
• a downgrade in the Company’s claims-paying and financial strength ratings could adversely impact the Company’s business volume, adversely impact the Company’s ability to access the capital markets and increase the Company’s borrowing costs;
• the inability of the Company’s insurance subsidiaries to pay dividends to the Company’s holding company in sufficient amounts would harm the Company’s ability to meet its obligations, pay future shareholder dividends or make future share repurchases;
• disruptions to the Company’s relationships with its independent agents and brokers could adversely affect the Company;
• the Company’s efforts to develop new products or expand in targeted markets may not be successful and may create enhanced risks;
• the Company may be adversely affected if its pricing and capital models provide materially different indications than actual results;
• the Company’s business success and profitability depend, in part, on effective information technology systems and on continuing to develop and implement improvements in technology;
• if the Company experiences difficulties with technology, data and network security, including as a result of cyber-attacks, and/or outsourcing relationships, including cloud-based, the Company’s ability to conduct its business could be negatively impacted;

• the Company is subject to a number of risks associated with its business outside the United States, including foreign currency exchange fluctuations and restrictive regulations;
• new regulations outside of the United States, including in the European Union, could adversely impact the Company’s results of operations and limit its growth;
• 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 could reduce the Company’s future profitability;
• acquisitions and integration of acquired businesses may result in operating difficulties and other unintended consequences;
• the Company could be adversely affected if its controls designed to ensure compliance with guidelines, policies and legal and regulatory standards are not effective;
• the Company’s businesses may be adversely affected if it is unable to hire and retain qualified employees;
• intellectual property is important to the Company’s business, and the Company may be unable to protect and enforce its own intellectual property or the Company may be subject to claims for infringing the intellectual property of others;
• changes to existing accounting standards may adversely impact the Company’s reported results;
• changes in U.S. tax laws or in the tax laws of other jurisdictions in which the Company operates could adversely impact the Company; and
• the Company’s share repurchase plans depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels commensurate with the Company’s desired ratings from independent rating agencies, 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 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” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 12, 2015.

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

The following measures are used by the Company’s management to evaluate financial performance against historical results and establish targets on a consolidated basis. 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 non-GAAP measures to their most directly 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. Internally, the Company’s management uses these measures to evaluate performance against historical results, to establish financial targets on a consolidated basis and for other reasons, which are discussed below.

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

Operating income is net income excluding the after-tax impact of net realized investment gains (losses) and discontinued operations. Management uses operating income to analyze each segment’s performance and as a tool in making business decisions. Financial statement users also consider operating income when analyzing the results and trends of insurance companies. Operating earnings per share is operating income on a per common share basis.

RECONCILIATION OF ADJUSTED SHAREHOLDERS’ EQUITY TO SHAREHOLDERS’ EQUITY AND OPERATING RETURN ON EQUITY TO RETURN ON EQUITY

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 shareholders’ equity is shareholders’ equity excluding net unrealized investment gains (losses), net of tax, net realized investment gains (losses), net of tax, for the period presented, preferred stock and discontinued operations. Adjusted average shareholders’ equity is average shareholders’ equity excluding net unrealized investment gains (losses), net of tax, for all quarters included in the calculation and, for each quarterly period included in the calculation, that quarter’s net realized investment gains (losses), net of tax and discontinued operations.