Investment Management
The primary purpose of our investment portfolio is to position us to fulfill our promise to our customers to fund future claim payments. For this reason, we employ a thoughtful investment philosophy that focuses on stable and appropriate risk-adjusted returns.
Approach
We strive to be thoughtful underwriters on both sides of our balance sheet, and we have always allocated our assets to support our insurance operations, not the reverse. Because the primary purpose of our investment portfolio is to fund future claim payments, Travelers employs a risk-adjusted approach to its investment portfolio. Our asset allocation gives us a high level of confidence that our capital is adequate to support our insurance business, in both good times and bad. Our approach has served us remarkably well over a long period and allows us to invest in our businesses with an eye to the future.
Our Co-Chief Investment Officers – members of our Management and Operating Committees – lead our Investment department, which directly manages our fixed income assets (93% of our investment portfolio), as well as our investments in equity securities, real estate, private equity limited partnerships, hedge funds, real estate partnerships and joint ventures. The Investment and Capital Markets Committee of the Board oversees our investment strategy and the risks related to our investment portfolio (including valuation and credit risks), capital structure, financing arrangements and liquidity.
Well-defined and consistent investment philosophy
Our investment portfolio is a key source of stability and strength for Travelers. The portfolio is managed first and foremost to support our insurance operations; accordingly, our investment portfolio is positioned to meet our obligations to policyholders under almost every foreseeable circumstance – anything from a global pandemic to a significant natural disaster to a financial crisis. 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.
The performance of our investment portfolio in 2023 underscores the wisdom of our thoughtful and diversified approach. Net investment income was very strong at $2.4 billion after-tax, reflecting higher long-term and short-term average yields and a higher average level of fixed maturity investments. While down year over year, as expected, our alternative portfolio continued to perform well, particularly in light of lower real estate and private equity returns in 2023.
Investment Income reliable contributor to results; $2.4 billion, after-tax, in 2023, dollars in millions as of December 31, 2023 unless otherwise noted, see details below.
Descriptive transcript (will need to update): Total Investment Portfolio. Travelers total investments amounted to $88.8 billion in FY23. 93% of investments are held in a fixed income portfolio, including 70% in municipal and corporate investments. 7% are held in non-fixed income investments, including private equities and real estate. 99% of FY23 investments are investment grade, including 47% held in Aaa-rated investments.
AFTER-TAX YIELD
Long-Term Securities in 2023 were 2.6 percent and in 2022 were 2.3 percent
Short-Term Securities in 2023 were 4.6 percent and in 2022 were 1.7 percent
TOTAL FIXED INCOME in 2023 was 2.7 percent and in 2022 was 2.3 percent
Non-Fixed Income in 2023 was 3.3 percent and in 2022 was 5.5 percent.
TOTAL INVESTMENTS in 2023 were 2.7 percent and in 2022 were 2.5 percent
FIXED INCOME PORTFOLIO
Corporates1 in 2023 were $34,109 and 38 percent
Municipal in 2023 was $28,506 and 32 percent
Mortgage-Backed Securities in 2023 were $7,818 and 9 percent
U.S. Government & Agencies in 2023 were $6,368 and 7 percent
Short-Term Securities in 2023 were $5,137 and 6 percent
Foreign Governments in 2023 were $1,006 and 1 percent
Total Fixed Income in 2023 was $82,944 and 93 percent
PERCENTAGE FIXED MATURITIES BY RATING2
Aaa in 2023 was 47 percent
Aa in 2023 was 20 percent
A in 2023 was 19 percent
Baa in 2023 was 13 percent
Investment Grade in 2023 was 99 percent
Below Investment Grade in 2023 was 1 percent
NON-FIXED INCOME PORTFOLIO
Private Equities in 2023 were $2,783 and 3 percent
Real Estate & Real Estate Partnerships in 2023 were $1,814 and 2 percent
Hedge Funds & Other in 2023 were $661 and 1 percent
Equity Securities in 2023 were $608 and 1 percent
Total Non-Fixed Income was $5,866 and 7%
1 Includes $1.04 billion of Commercial Mortgage-Backed Securities with an Aaa rating and $564 million of Asset-Backed Securities with an Aa1 Rating.
2 Rated using external rating agencies or by Travelers when a public rating does not exist. Rating shown are the higher of the rating of the underlying issues or the insurer in the case of securities enhanced by third-party insurance for the payment of principal and interest in the event of issuer default. Below investment grade assets refer to securities rate “Ba” or below.
More about investment management
Responsible investing
In addition to achieving appropriate risk-adjusted returns, our investments enable many environmental and social improvements.
ESG factors in investment decisions
We recognize the importance of responsible investment and, accordingly, incorporate relevant environmental, social and governance (ESG) factors in assessing the sustainability of the entities in which we invest.