If, at the close of business on March 31, 2014, you were a shareholder of record or held shares through Travelers’ 401(k) Savings Plan or through a broker or bank, you may vote your shares by proxy on the Internet, by telephone or by mail, or you may also vote in person at the Annual Meeting. For shares held through a broker or nominee, you may vote by submitting voting instructions to your broker or nominee. To reduce our administrative and postage costs, we ask that you vote on the Internet or by telephone, both of which are available 24 hours a day. You may revoke your proxies or change your vote at the times and as described on page 4 of this Proxy Statement.

If you are a shareholder of record or hold shares through a broker or bank and are voting by proxy, your vote must be received by 11:59 p.m. (Eastern Daylight Time) on May 26, 2014 to be counted.

If you hold shares through Travelers’ 401(k) Savings Plan, your vote must be received by 11:59 p.m. (Eastern Daylight Time) on May 22, 2014 to be counted. Those votes cannot be changed or revoked after that time, and those shares cannot be voted in person at the Annual Meeting.

To vote by proxy:

BY INTERNET

·   Go to the website www.proxyvote.com and follow the instructions, 24 hours a day, seven days a week.

·   You will need the 12-digit number included on your Notice of Internet Availability of Proxy Materials or on your proxy card.

BY TELEPHONE

·   From a touch-tone telephone, dial (800) 690-6903 and follow the recorded instructions, 24 hours a day, seven days a week.

·   You will need the 12-digit number included on your Notice of Internet Availability of Proxy Materials or on your proxy card.

BY MAIL

·   If you have not already received a proxy card, you may request a proxy card from us by following the instructions on your Notice of Internet Availability of Proxy Materials.

·   When you receive the proxy card, mark your selections on the proxy card.

·   Date and sign your name exactly as it appears on your proxy card.

·   Mail the proxy card in the postage-paid envelope that will be provided to you.

We are providing this Proxy Statement to you in connection with the solicitation by the Board of Directors (the “Board”) of The Travelers Companies, Inc. (the “Company” or “Travelers”) of proxies to be voted at our Annual Meeting of Shareholders to be held on May 27, 2014 (“Annual Meeting”), and at any postponements or

adjournments of the Annual Meeting. We have either (1) delivered to you a Notice of Internet Availability of Proxy Materials (the “Notice”) and made these proxy materials available to you on the Internet or (2) delivered printed versions of these materials, including a proxy card, to you by mail.

There are five items scheduled to be voted on at the meeting:

·  Item 1: Election of the 12 director nominees listed in this Proxy Statement;

·  Item 2: Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2014;

·  Item 3: Non-binding vote to approve executive compensation;

·  Item 4: Approval of The Travelers Companies, Inc. 2014 Stock Incentive Plan (the “2014 Stock Incentive Plan”); and

·  Item 5: Shareholder proposal relating to political contributions and expenditures, if presented at the Annual Meeting.

Shareholders as of the close of business on March 31, 2014 (the “Record Date”) may vote at the Annual Meeting. You have one vote for each share of common stock held by you as of the Record Date, including shares:

·  Held directly in your name as “shareholder of record” (also referred to as “registered shareholder”);

·  Held for you in an account with a broker, bank or other nominee (shares held in “street name”)—street name holders generally cannot vote their shares directly and instead must instruct the broker, bank or nominee how to vote their shares; and

·  Credited to your account in the Company’s 401(k) Savings Plan.

A majority of the shares of common stock entitled to vote must be present or represented by proxy to constitute a quorum at the Annual Meeting. Abstentions and shares represented by “broker non-votes,” as described below, are counted as present

and entitled to vote for purposes of determining a quorum. On the Record Date, 347,461,002 shares of the Company’s common stock were outstanding, and each share is entitled to one vote at the Annual Meeting.

Each director is elected at the Annual Meeting by the affirmative vote of a majority of the votes cast with respect to the director, which means that, of the votes cast by the holders of all the then outstanding shares of voting stock of the Company, those votes cast “FOR” a director must exceed the votes cast “AGAINST” that director. In an uncontested election of directors at which a quorum is present, if any nominee for director receives a greater number of votes “AGAINST” his or her election than votes “FOR” such election, our Governance Guidelines require that such person must promptly tender his or her resignation to the Board following certification of the shareholder vote. Our Governance Guidelines further provide that the Nominating and Governance Committee will then consider the tendered resignation and make a recommendation to the Board as to whether to accept or reject the tendered resignation or whether other action should be taken. The Board will act on the tendered resignation, taking into account the Nominating and Governance Committee’s

recommendation, and publicly disclose its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the election results. Cumulative voting in the election of directors is not permitted.

Shareholder approval of each of the other proposals, including the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2014, the non-binding vote to approve executive compensation, the proposal to approve the 2014 Stock Incentive Plan and the shareholder proposal relating to political contributions and expenditures, if presented at the Annual Meeting, requires an affirmative vote equal to the greater of (1) a majority of the votes represented in person or by proxy at the Annual Meeting that are entitled to vote on the item and (2) a majority of the voting power of the minimum number of shares entitled to vote that would constitute a quorum at the Annual Meeting.

A broker non-vote occurs if you hold your shares in street name and do not provide voting instructions to your broker on a proposal and your broker does not have discretionary authority to vote on such proposal. Under current New York Stock Exchange (“NYSE”) rules, your broker will not have discretion to vote your uninstructed shares with respect to Item 1 (election of the 12 director nominees listed in this Proxy Statement), Item 3 (non-binding vote to approve

executive compensation), Item 4 (approval of the 2014 Stock Incentive Plan) and Item 5 (shareholder proposal on political contributions and expenditures), if presented at the Annual Meeting. Your broker will have discretion to vote your uninstructed shares on Item 2 (ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2014).

With respect to the election of directors, you may vote “FOR” or “AGAINST” each of the nominees for the Board, or you may “WITHHOLD” authority to vote for one or more nominees. A “WITHHOLD” vote and a broker non-vote will have the same effect as an abstention and will not count as a vote “FOR” or “AGAINST” a director.

With respect to the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2014, the non-binding vote to approve executive compensation, the approval of the 2014 Stock Incentive Plan and the shareholder proposal relating to political contributions and expenditures, if presented at the Annual Meeting, you

may vote “FOR”, “AGAINST” or “ABSTAIN”. An abstention will have the same effect as a vote against these items, and a broker non-vote will have no effect in determining whether these items are approved unless a majority of the voting power of the minimum

number of shares entitled to vote that would constitute a quorum at the Annual Meeting is required in order to approve, in which case, a broker non-vote will have the same effect as a vote against.

Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes. Representatives

of American Election Services, LLC will act as inspectors of election.

Our Board recommends that you vote your shares:

·  “FOR” each of the nominees to the Board set forth in this Proxy Statement;

·  “FOR” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2014;

·  “FOR” the non-binding approval of executive compensation;

·  “FOR” the approval of the 2014 Stock Incentive Plan; and

·  “AGAINST” the shareholder proposal relating to political contributions and expenditures.

If you are a registered holder and you sign and submit your proxy card without indicating your voting instructions, your shares will be voted in accordance with the Board’s recommendations.

If you are a shareholder of record or hold shares through our 401(k) Savings Plan, you may vote by granting a proxy. Specifically, you may vote:

·  By Internet—You may submit your proxy by going to www.proxyvote.com and following the instructions on how to complete an electronic proxy card. You will need the 12-digit number included on your Notice or proxy card in order to vote by Internet.

·  By Telephone—You may submit your proxy by using a touch-tone telephone to dial (800) 690-6903 and following the recorded instructions. You will need the 12-digit number included on your Notice or proxy card in order to vote by telephone.

·  By Mail—You may vote by mail by requesting a proxy card from us, indicating your vote by completing, signing and dating the card where indicated and by mailing or otherwise returning the card in the envelope that will be provided to you. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney

or officer of a corporation), indicate your name and title or capacity.

If you hold your shares in street name, you may vote by submitting voting instructions to your bank, broker or other nominee. In most instances, you will be able to do this on the Internet, by telephone or by mail as indicated above. Please refer to information from your bank, broker or other nominee on how to submit voting instructions.

Internet and telephone voting facilities will close at 11:59 p.m. (Eastern Daylight Time) on May 26, 2014 for the voting of shares held by shareholders of record or held in street name and at 11:59 p.m. (Eastern Daylight Time) on May 22, 2014 for the voting of shares held by current and former employees through the Company’s 401(k) Savings Plan.

Mailed proxy cards with respect to shares held of record or in street name must be received no later than May 26, 2014.

Mailed proxy cards with respect to shares held by current and former employees through the Company’s 401(k) Savings Plan must be received no later than May 22, 2014.

First, you must satisfy the requirements for admission to the Annual Meeting (see below). Then, if you are a shareholder of record and prefer to vote your shares at the Annual Meeting, you must bring proof of identification along with your Notice, proxy card or proof of ownership. You may vote shares held in street name at the Annual Meeting only if you obtain a signed proxy from the record holder (broker or other nominee) giving you the right to vote the shares.

Even if you plan to attend the Annual Meeting, we encourage you to vote in advance by Internet, telephone or proxy card so that your vote will be counted if you later decide not to attend the Annual Meeting.

Shares held by current and former employees through the Company’s 401(k) Savings Plan cannot be voted in person at the Annual Meeting.

It generally means you hold shares registered in more than one account. To ensure that all your shares are voted, please sign and return each proxy card, or, if

you vote by Internet or telephone, vote once for each Notice or proxy card you receive.

Yes. Whether you have voted by Internet, telephone or mail, if you are a shareholder of record, you may revoke your proxy or change your vote by:

·   Sending a written statement to that effect to our Corporate Secretary or to any corporate officer of the Company, provided such statement is received no later than May 26, 2014;

·   Voting again by Internet or telephone at a later time before the closing of those voting facilities at 11:59 p.m. (Eastern Daylight Time) on May 26, 2014;

·   Submitting a properly signed proxy card with a later date that is received no later than May 26, 2014; or

·   Attending the Annual Meeting, revoking your proxy and voting in person.

If you are a current or former employee and hold shares through Travelers’ 401(k) Savings Plan, you may change your vote and revoke your proxy by any of the first three methods listed if you do so no later than 11:59 p.m. (Eastern Daylight Time) on May 22, 2014. You cannot, however, revoke or change your proxy with respect to shares held through the Company’s 401(k) Savings Plan after that date, and you cannot vote those shares in person at the Annual Meeting.

If you hold shares in street name, you may submit new voting instructions by contacting your bank, broker or other nominee. You may also change your vote or revoke your proxy in person at the Annual Meeting if you obtain a signed proxy from the record holder (broker or other nominee) giving you the right to vote the shares.

You will need a form of personal identification (such as a driver’s license) along with either your Notice, proxy card or proof of stock ownership to enter the Annual Meeting. If your shares are held beneficially in the name of a bank, broker or other holder of record and you wish to

be admitted to the Annual Meeting, you must present proof of your ownership of The Travelers Companies, Inc. stock, such as a bank or brokerage account statement.

Please note that no cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Annual Meeting.

At the date this Proxy Statement went to press, we did not know of any matters to be raised at the Annual Meeting other than those referred to in this Proxy Statement.

If other matters are properly presented at the Annual Meeting for consideration and you are a shareholder of record and have submitted a proxy card, the persons named in your proxy card will have the discretion to vote on those matters for you.

We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees (for no additional compensation) in person or by telephone, electronic transmission and facsimile transmission. Brokers and other nominees will be requested to solicit proxies or authorizations from

beneficial owners and will be reimbursed for their reasonable expenses. In addition, we have hired Morrow & Co., LLC to solicit proxies. We expect to pay Morrow & Co., LLC a fee of $15,000 plus reasonable expenses for these services.

If you wish to propose a matter for consideration at our 2015 Annual Meeting of Shareholders, the proposal should be mailed by certified mail return receipt requested, to our Corporate Secretary, at the Company’s principal executive office, 485 Lexington Avenue, New York, New York 10017. To be eligible under the Securities and Exchange Commission (“SEC”) shareholder proposal rule (Rule 14a-8(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) for inclusion in our 2015 Annual

Meeting Proxy Statement and form of proxy to be made available in April 2015, a shareholder proposal must be received by our Corporate Secretary at our principal executive office on or before December 12, 2014. Failure to deliver a proposal in accordance with this procedure may result in it not being deemed timely received. For additional requirements, see “Shareholder Proposals for 2015 Annual Meeting” on page 87 of this Proxy Statement.

All members of the Audit Committee are “independent”, consistent with our Governance Guidelines and the NYSE listing standards and SEC rules applicable to boards of directors in general and audit committees in particular. In addition, the Board has determined that the members of the Audit Committee meet the financial literacy requirements of the NYSE. The Board also has determined that

Mr. Dasburg’s experience with KPMG Peat Marwick from 1973 to 1980, his service as a KPMG Tax Partner from 1978 to 1980, his experience as Chief Financial Officer of Marriott Corporation, as Chief Executive Officer of Northwest Airlines, Burger King Corporation and ASTAR and his service on the audit committees of other public companies qualify him as an audit committee financial expert, and he has been

so designated. The duties and responsibilities of the Audit Committee are set forth in its charter, which may be found at www.travelers.com under For Investors: Corporate Governance: Committee Charters: Audit Committee; and include the following:

With respect to reporting and disclosure matters, the duties and responsibilities of the Audit Committee include reviewing our audited financial statements and recommending to the Board that they be included in our Annual Report on Form 10-K in accordance with applicable rules and regulations of the SEC.

All members of the Compensation Committee are “independent” as defined by our Governance Guidelines and the NYSE listing standards. In addition, all members of the Compensation Committee qualify as “non-employee directors” for purposes of Rule 16b-3 of the Exchange Act, and as “outside directors” for purposes of Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The Compensation Committee has a charter, which may be found at www.travelers.com under For Investors: Corporate Governance: Committee Charters: Compensation Committee.

With respect to general compensation matters, the duties and responsibilities of the Compensation Committee include the following:

With respect to reporting and disclosure matters, the duties and responsibilities of the Compensation Committee include reviewing and discussing the Compensation Discussion and Analysis with management and authorizing its inclusion in our annual proxy statement and Annual Report on Form 10-K in accordance with applicable rules and regulations of the SEC.

Establishment of Annual Bonus and Equity Award Pools

The Compensation Committee approves the individual salary, annual bonus and equity awards for the Committee Approved Officers. In addition, the Compensation Committee approves the aggregate annual bonuses and all equity awards to employees who are not Committee Approved Officers.

Pursuant to its charter, the Compensation Committee considered recommendations from the CEO regarding compensation for each of the other executive officers named in the Summary Compensation Table on page 52 (together with the CEO, the “named executive officers”) and other officers.

During 2013, the Compensation Committee took those actions required under Section 162(m) in order for performance-based compensation to be fully deductible by the Company for income tax purposes.

Delegation of Authority with Respect to “Off-Cycle” Equity Grants

The Compensation Committee has delegated limited authority to the Chairman and CEO to make certain “off-cycle” equity grants outside of the annual equity grant process to employees and new hires who are not Committee Approved Officers. The delegation is subject to maximum grant date values of equity that can be granted to any one person. These grants can only be made on the grant dates established by our Governance Guidelines for “off-cycle” equity awards. Our Governance Guidelines are available on our website at www.travelers.com under For Investors:

Corporate Governance: Governance Documents: Governance Guidelines. Any awards made “off-cycle” are reported to the Compensation Committee at the next regularly scheduled quarterly meeting following such awards.

Compensation Consultant

The Compensation Committee has the authority under its charter to retain outside consultants or advisors, as it deems necessary or advisable. In accordance with this authority, the Compensation Committee has engaged Frederic W. Cook & Co. (“F. W. Cook”) as its independent outside compensation consultant to provide it with objective and expert analyses, advice and information with respect to executive compensation. All executive compensation services provided by F. W. Cook are conducted under the direction or authority of the Compensation Committee, and all work performed by F. W. Cook must be pre-approved by the Compensation Committee or the Chair of the Compensation Committee. Neither F. W. Cook nor any of its affiliates maintains any other direct or indirect business relationships with the Company or any of its affiliates. In November 2013, the Compensation Committee evaluated whether any work provided by its Compensation Committee consultant raised any conflict of interest and determined that it did not.

F. W. Cook also advises the Nominating and Governance Committee with respect to director compensation.

As requested by the Compensation Committee, in 2013, F. W. Cook’s services to the Compensation Committee included, among other things:

An F. W. Cook representative participated in each of the five Compensation Committee meetings in 2013.

In 2013 and 2012, we paid F. W. Cook $160,817 and $150,881, respectively, for services to the Compensation Committee and the Nominating and Governance Committee. In 2013 and 2012, we paid $176,713 and $112,413, respectively, to certain other compensation consultants retained by management to

provide broad-based compensation surveys. Such other consultants retained by management did not have any role in determining or recommending the amount or form of executive or director compensation.

In addition to the independent, outside compensation consultant discussed above, our corporate staff (including Finance, Human Resources and Legal staff members) supports the Compensation Committee in its work. Other than the CEO (with respect to compensation for all other executive officers) and other executive officers (with respect to executive officers that report to them), no executive officer determines or recommends to the Compensation Committee the amount or form of executive compensation paid to another executive officer.

The Board has granted to the Executive Committee, subject to certain limitations set forth in its charter, the broad responsibility of exercising the authority of the Board in the oversight of our business during the intervals between Board meetings in order to provide a degree of flexibility and ability to respond to time-sensitive business and legal matters. The

Executive Committee meets only as necessary. The duties and responsibilities of the Executive Committee are set forth in its charter, which may be found at www.travelers.com under For Investors: Corporate Governance: Committee Charters: Executive Committee.

The Investment and Capital Markets Committee assists the Board in exercising its oversight of the Company’s management of its investment portfolios (including credit risk monitoring) and certain financial affairs of the Company (including capital management, such as dividend policy and actions, stock splits, repurchases of stock or other securities, financing arrangements, debt and equity financing and liquidity).

The Investment and Capital Markets Committee also reviews and either approves, or recommends

appropriate Board action with respect to, among other matters, the issuance of securities, the establishment of bank lines of credit and certain purchases and dispositions of real property, capital expenditures and acquisitions and divestitures of assets.

The duties and responsibilities of the Investment and Capital Markets Committee are set forth in its charter, which may be found at www.travelers.com under For Investors: Corporate Governance: Committee Charters: Investment and Capital Markets Committee.

Nominating and Governance Committee

Each member of the Nominating and Governance Committee is “independent”, consistent with our Governance Guidelines and the NYSE listing standards. The duties and responsibilities of the Nominating and Governance Committee are set forth in its charter, which may be found at www.travelers.com under For Investors: Corporate Governance:

Committee Charters: Nominating and Governance Committee, and include the following:

The purpose of the Risk Committee is to assist the Board in exercising its oversight of our operational activities and the identification and review of those risks that could have a material impact on us. The duties and responsibilities of the Risk Committee are set forth in its charter, which may be found at www.travelers.com under For Investors: Corporate Governance: Committee Charters: Risk Committee, and include oversight of management’s risk management activities in the following areas:

Our Governance Guidelines, our Code of Business Conduct and Ethics, Board Committee charters and other corporate governance information are available on the Corporate Governance page of the “For

Investors” section on our website at www.travelers.com. Corporate governance practices that the Board has implemented are described further below.

Our commitment to good corporate governance is reflected in our Governance Guidelines, which describe the Board’s views on a wide range of governance topics. These Governance Guidelines are

reviewed annually by the Nominating and Governance Committee and, to the extent deemed appropriate in light of emerging practices, revised accordingly, upon recommendation to and approval by the full Board.

We maintain a Code of Business Conduct and Ethics (the “Code of Conduct”), which is applicable to all of our directors, officers and employees, including our CEO, Chief Financial Officer, Controller and other senior financial officers. The Code of Conduct sets forth our policies and expectations on a number of topics, including conflicts of interest, compliance with laws, use of our assets and business ethics.

The Code of Conduct may be found on our website at www.travelers.com under For Investors: Corporate Governance: Code of Conduct.

Our Chief Compliance Officer is responsible for overseeing compliance with the Code of Conduct as part of fulfilling his responsibility for overseeing our compliance functions throughout the organization. Our Chief Compliance Officer also assists in the communication of the Code of Conduct and oversees employee education regarding its requirements through the use of global, computer based training, supplemented with focused in person sessions where appropriate. All employees and directors are required to certify annually that they have reviewed, understand and agree to comply with the contents of the Code of Conduct.

We maintain an Ethics Helpline through which employees can report integrity concerns or seek guidance regarding a policy or procedure. The Ethics Helpline is serviced by an independent company, is available seven days a week, 24 hours a day and can be accessed by individuals through a toll-free number. Employees may also access the helpline system and report integrity concerns via the Internet. In either case, employees can report concerns anonymously. We maintain a formal no retaliation policy that prohibits retaliation against, or discipline of, an employee who raises an ethical concern in good faith. Once a complaint is alleged, the report is forwarded to our Chief Compliance Officer who is responsible for

oversight of the helpline. Our Chief Compliance Officer coordinates with management and outside resources, as appropriate, to investigate the matter, and any ethical or compliance-related issues will not be closed until they have been addressed to his satisfaction. The Audit Committee receives quarterly summaries of matters reported through the Ethics Helpline. In addition, any matter reported to the Chief Compliance Officer that involves accounting, internal control or audit matters, or any fraud involving persons with a significant role in our internal controls, is required to be reported promptly to the Audit Committee.

Under the oversight of the Audit Committee, we have established a Company-wide compliance function, with a view to ensuring compliance with evolving laws, regulations and policies and to encourage and reinforce ongoing ethical and lawful business conduct. Our Chief Compliance Officer meets regularly with

members of senior management to oversee the implementation of various compliance initiatives and functions in each of the business units and to promote better coordination and effectiveness through corporate compliance policies and initiatives, program design and promotion of a culture of compliance.

The Board believes its non-management directors should accumulate and retain a level of ownership of our equity securities to align the interests of the non-management directors and the shareholders. Accordingly, the Board has established an ownership target for each non-management director equal to four times the director’s most recent annual deferred stock award. Each new director is expected to meet or exceed this target within four years of his or her initial election to the Board, provided that, if the annual deferred stock award for any of such four years is less than the most recent annual deferred stock award, such director is expected to meet or exceed the target within five years of his or her election to the Board.

All of our current non-management directors have achieved stock ownership levels in excess of the amount required except for Mr. Kane, who was elected to our Board in 2012, and Mr. Ruegger, who was elected to our Board in 2014. Directors receive over 50% of their annual compensation in the form of deferred stock units. The shares underlying these units are not distributed to a director until at least six months after the director leaves the Board. Accordingly, all of our non-management directors hold equity interests that they cannot sell for so long as they serve on the Board and at least six months afterwards.

The Governance Guidelines provide generally that no person who will have reached the age of 74 on or before the date of the next annual shareholders’ meeting will be nominated for election at that meeting.

Under special circumstances, with the approval of the Board, exceptions can be made to this policy. The Board believes, however, that exceptions to this policy should not be commonplace and should be based upon the needs of the Company and the individual attributes of the director.

Process and Criteria Generally

Pursuant to our Governance Guidelines, the Nominating and Governance Committee is responsible for recommending to the Board nominees for election for director, and the Board is responsible for selecting nominees for election.

As required by our Governance Guidelines, the Board, based on the Nominating and Governance Committee’s recommendation, selects nominees after considering the following criteria:

The evaluation of these criteria involves the exercise of careful business judgment. Accordingly, although the Nominating and Governance Committee and the Board at a minimum assess each candidate’s ability to satisfy any applicable legal requirements or listing standards, his or her strength of character, judgment, working style, specific areas of expertise and his or her ability and willingness to commit adequate time to Board and committee matters, they do not have specific minimum qualifications that are applicable to all director candidates. The Board seeks to ensure that the Board is composed of members whose particular expertise, qualifications, attributes and skills, when taken together, allow the Board to satisfy its oversight responsibilities effectively.

As mentioned above, the Nominating and Governance Committee and the Board include diversity of “viewpoints, background, experience and other demographics” as one of several criteria that they consider in connection with selecting candidates for the Board. While neither the Board nor the Nominating and Governance Committee has a formal diversity policy, one of many factors that the Board and the Nominating and Governance Committee carefully considers is the importance to the Company of racial and gender diversity in board composition. Moreover, when considering director candidates, the Nominating and Governance Committee and the Board seek individuals with backgrounds and qualities that, when combined with those of our incumbent directors, enhance the Board’s effectiveness and, as required by the Governance Guidelines, result in the Board having “a broad range of skills, expertise, industry knowledge, diversity of opinion and contacts relevant to the Company’s business”. As part of its annual self-evaluation, the Board assesses and confirms compliance with this Governance Guideline.

In identifying prospective director candidates for the Board, the Nominating and Governance Committee may seek referrals from other members of the Board, management, shareholders and other sources. The Nominating and Governance Committee also may, but need not, retain a professional search firm in order to assist it in these efforts. The Nominating and Governance Committee and the Board utilize the same criteria for evaluating candidates regardless of the source of the referral. Mr. Ruegger, who was appointed by the Board in February 2014, was recommended to the Nominating and Governance Committee by our Chief Executive Officer. After reviewing Mr. Ruegger’s qualifications, meeting with him several times and discussing his potential

nomination at two separate meetings, the Nominating and Governance Committee voted unanimously to recommend Mr. Ruegger to the Board of Directors. The entire Board met with Mr. Ruegger prior to appointing him as a member of the Board. No fees were paid with respect to the appointment of Mr. Ruegger.

The Nominating and Governance Committee will consider director candidates recommended by shareholders. Shareholders wishing to propose a candidate for consideration may do so by submitting the proposed candidate’s full name and address, résumé and biographical information to the attention of the Corporate Secretary, The Travelers Companies, Inc., 485 Lexington Avenue, New York, New York 10017. All recommendations for nomination received by the Corporate Secretary that satisfy our bylaw requirements relating to such director nominations will be presented to the Nominating and Governance Committee for its consideration.

Specific Considerations Regarding 2014 Directors and Nominees

In considering the 12 director nominees named in this Proxy Statement and proposed for election by you at the Annual Meeting, the Nominating and Governance Committee and the Board evaluated each nominee’s experiences, qualifications, attributes and skills, in light of the Governance Guidelines’ criteria for nomination discussed above. The Board and the Nominating and Governance Committee also considered the years of experience many directors have had working together on the Board and the individual tenure of Board members and concluded that there was an appropriate mix of long-serving and new directors. The Board and Nominating and Governance Committee also noted that, given the Company’s industry where a long-term perspective is critical and a historical perspective on risk is important, the Company benefits from having longstanding directors serve on the Board. In addition, they considered the contributions of those directors recommended for re-election in the context of the Board self-evaluation process and other perceived needs of the Board.

The Board and the Nominating and Governance Committee, in considering each nominee, principally focused on the background and experiences of the nominee, as described in the biographies appearing on pages 6 through 9 of this Proxy Statement. The Board and the Nominating and Governance Committee

considered that each nominee has experience serving in senior positions with significant responsibility, where each has gained valuable expertise in a number of areas relevant to the Company and its business. The Board and the Nominating and Governance Committee also considered that a number of directors have gained valuable experience and skills through serving as a director of other public and private companies. Specifically, among other things:

Under our Governance Guidelines and NYSE rules, a director is not independent unless the Board affirmatively determines that he or she does not have a direct or indirect material relationship with the Company. In addition, the director must meet the bright-line test for independence set forth by the NYSE rules.

The Board has established categorical standards of director independence to assist it in making independence determinations. These standards, which are included in our Governance Guidelines and may be found on our website at www.travelers.com under For Investors: Corporate Governance: Governance Documents: Governance Guidelines, set forth certain relationships between the Company and the directors

and their immediate family members, or entities with which they are affiliated, that the Board, in its judgment, has determined to be material or immaterial in assessing a director’s independence. The Nominating and Governance Committee annually reviews the independence of all directors and reports its determinations to the full Board.

In the event a director has a relationship with the Company that is relevant to his or her independence and is not addressed by the categorical independence standards, the independent members of the Board determine in their judgment whether such relationship is material.

Our Governance Guidelines require that: (1) all members of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee be independent; and (2) no more than two members of the Board may concurrently serve as officers of the Company.

The Board has determined that all of its directors and all of the persons proposed for election at the Annual Meeting are independent, other than our Chairman and Chief Executive Officer, Mr. Jay Fishman, who is an employee of the Company. Consequently, approximately 92% of the directors on the Board are independent.

In making its independence determinations, the Board considered and reviewed the various commercial, charitable and employment transactions and relationships known to the Board (including those

identified through annual directors’ questionnaires) that exist between us and our subsidiaries and the entities with which certain of our directors or members of their immediate families are, or have been, affiliated. Specifically, the Board’s independence determinations included reviewing membership dues, contributions and research fees paid to a trade association and affiliated entities where Mr. Donald Shepard serves as a director (but not as an executive officer or employee). Payments to the organization constituted less than 1% of such organization’s consolidated gross revenues during its last completed fiscal year and were below the thresholds set forth under our categorical standards of director independence. Additionally, the Board reviewed the amount paid by the Company to Simpson Thacher, the law firm in which Mr. Pete Ruegger previously was a partner and served as Chairman until his retirement in 2013. In particular, the Board considered that Mr. Ruegger is no longer a partner of, or employed by, Simpson Thacher and had not worked on Company matters for several years prior to leaving Simpson Thacher. In addition, payments by the Company to Simpson Thacher in 2013 represented less than 2% of the consolidated gross revenues of Simpson Thacher during its last completed fiscal year and were below the thresholds set forth under our categorical standards of director independence.

The Board determined that the transactions identified were not material and did not affect the independence of such director under either the Company’s Governance Guidelines or the applicable NYSE rules.

The Board has adopted a Governance Guideline establishing fixed grant dates for the award of “off-cycle” equity grants, so as to avoid the appearance that equity grant dates have been established with a view to benefiting grantees due to the timing of material public announcements. Our Governance Guidelines are available on our website at www.travelers.com under For Investors: Corporate Governance: Governance Documents: Governance Guidelines.

In addition, to further ensure the integrity of our equity awards process, the Compensation Committee

requires that the exercise price of all stock options granted, and the fair value of all equity awards made, must be determined by reference to the closing price for a share of our common stock on the NYSE on the date of any such grant or award. Under both the Amended and Restated 2004 Stock Incentive Plan (the “2004 Stock Incentive Plan”) and the proposed 2014 Stock Incentive Plan, the Compensation Committee may not take any action with respect to any stock option that would be treated as a “repricing” of such stock option, unless such action is approved by the Company’s shareholders in accordance with applicable rules of the NYSE.

The Board has adopted a written Related Person Transaction Policy to assist it in reviewing, approving and ratifying related person transactions and to assist us in the preparation of related disclosures required by the SEC. This Related Person Transaction Policy supplements our other policies that may apply to transactions with related persons, such as the Board’s Governance Guidelines and our Code of Conduct.

The Related Person Transaction Policy provides that all related person transactions covered by the policy are prohibited, unless approved or ratified by the Board or by the Nominating and Governance Committee. Our directors and executive officers are required to provide prompt and detailed notice of any potential Related Person Transaction (as defined in the policy) to the Corporate Secretary, who in turn must promptly forward such notice and information to the Chairperson of the Nominating and Governance Committee and to our counsel for analysis, to determine whether the particular transaction constitutes a Related Person Transaction requiring compliance with the policy. The analysis and recommendation of counsel are then presented to the Nominating and Governance Committee for consideration at its next regular meeting.

In reviewing Related Person Transactions for approval or ratification, the Nominating and Governance Committee will consider the relevant facts and circumstances, including:

The Nominating and Governance Committee will not approve or ratify a Related Person Transaction unless, after considering all relevant information, it has determined that the transaction is in, or is not inconsistent with, the best interests of the Company and our shareholders.

Generally, the Related Person Transaction Policy applies to any current or proposed transaction in which:

A copy of our Related Person Transaction Policy is available on our website at www.travelers.com under For Investors: Corporate Governance: Governance Documents: Related Person Transaction Policy.

Employment Relationships

We employ approximately 30,800 employees, approximately 7,400 of whom work in and around Hartford, Connecticut. We employ several employees in the Hartford area who are related to the executive officers identified below:

·                  Mr. Brian MacLean is President and Chief Operating Officer of the Company. His daughter,

Ms. Erin Cha, and his son-in-law, Mr. Junghwan Cha, have been employed by the Company since 2005 and 2009, respectively. In 2013, their combined total compensation, including salary, bonuses, equity awards and other benefits, totaled approximately $311,000. Their compensation is commensurate with that of their peers.

·                  Mr. William Cunningham is Executive Vice President—Business Insurance. His brother, Gregg T. Cunningham, has been employed by the Company since 2001. In 2013, his total compensation,

including salary, bonus, equity awards and other benefits, totaled approximately $466,000. His compensation is commensurate with that of his peers.

We engage several thousand law firms, nationally and internationally, to represent us and/or our insureds in connection with, among other things, corporate, litigation, regulatory, insurance coverage and claim matters. In 2013, we engaged several law firms with partners related to the executive officers identified below:

·      Mr. Alan Schnitzer is Vice Chairman—Financial, Professional & International Insurance and Field Management; Chief Legal Officer of the Company. Mr. Schnitzer’s brother-in-law, Mr. Joseph Berman, is a partner in the law firm Looney & Grossman. In 2013, the Company paid approximately $414,000 in legal fees and disbursements to Looney & Grossman. We engage this firm from time to time in the ordinary course of our business and on an arm’s-length basis. Mr. Schnitzer has explicitly recused himself from any involvement with respect to our retention of, or payments to, this law firm.

·                  Ms. Doreen Spadorcia is Vice Chairman—Claim Services, Personal Insurance, Operations and Systems, & Risk Control. Her husband, Mr. Richard Cavo, is a partner in the law firm Litchfield Cavo LLP. In 2013, we paid this firm approximately $17.2 million in legal fees and disbursements for work performed by the firm. Litchfield Cavo LLP has been an approved firm of the Company for more than ten years and is retained by the Company from time to time in the ordinary course of business and on an arm’s- length basis. Ms. Spadorcia has been an executive officer of the Company since 2005. Ms. Spadorcia has explicitly recused herself from any involvement with respect to our retention of, or payments to, this law firm.

From time to time, institutional investors, such as large investment management firms, mutual fund management organizations and other financial organizations become beneficial owners (through aggregation of holdings of their affiliates) of 5% or more of a class of voting securities of the Company and, as a result, are considered a “related person” under the Related Person Transaction Policy. These organizations may provide services to the Company or

its benefit plans. In addition, the Company may provide insurance coverage to these organizations. In 2013, the following transactions occurred with investors who reported beneficial ownership of 5% or more of the Company’s voting securities:

In addition to the Related Person Transaction Policy, our Code of Conduct requires that all employees, officers and directors avoid any situation that involves or appears to involve a conflict of interest between their personal and professional relationships. Our Audit Committee provides oversight regarding compliance with our Code of Conduct and discusses any apparent conflicts of interest with senior management. The Code of Conduct also requires that all employees seek approval from both our General Counsel and our Chief Compliance Officer prior to accepting a position as a director or officer of any unaffiliated for-profit company or organization.

Our Governance Guidelines provide for the position of Lead Director whenever the Chairman of the Board is also the Chief Executive Officer or is a director who does not otherwise qualify as an independent director. Mr. Fishman serves as Chairman of the Board as well as Chief Executive Officer, and Mr. Dasburg currently serves as our Lead Director. The position of Lead Director has been in place since 2006. In accordance with our Governance Guidelines, the Lead Director is responsible for coordinating the efforts of the independent and non-management directors “in the interest of ensuring that objective judgment is brought to bear on sensitive issues involving the management of the Company and, in particular, the performance of senior management”. Among other things, the Lead Director has the authority to:

The independent directors elect the Lead Director from among the independent directors. A more complete description of the role of the Lead Director is set forth in our Governance Guidelines, which are available on our website at www.travelers.com. The Board believes that its current leadership structure is appropriate for the Company at this time. The Board

believes that the responsibilities of the Lead Director help to assure appropriate oversight of Company management by the Board and optimal functioning of the Board. The effectiveness of the Lead Director is enhanced by the Board’s independent character. The Board annually reviews the independence of our directors and has determined that 11 of the 12 director nominees are independent. See “Director Independence and Independence Determinations” on page 18 of this Proxy Statement. Each of the Compensation Committee, Audit Committee, Risk Committee, Nominating and Governance Committee and Investment and Capital Markets Committee is comprised solely of independent directors. In addition, at each in-person Board meeting, the non-employee directors are scheduled to meet in executive session with the Lead Director presiding at such meetings.

Finally, as described in more detail under “Director Nominations—Specific Considerations Regarding 2014 Directors and Nominees”, the Lead Director and the independent directors have substantial experience with public company management and governance, in general, and the Company, in particular. At the same time, the combined role of Chairman and Chief Executive Officer, in the case of the Company, means that the Chair of the Board has longstanding experience with property and casualty insurance and ongoing executive responsibility for the Company. In the Board’s view, this enables the Board to better understand the Company and work with management to enhance shareholder value. In the Board’s view, this also enables it to better fulfill its risk oversight responsibilities, as described below. In addition, this enables the Chief Executive Officer to effectively communicate the Board’s view to management, thereby ensuring a common purpose.

In summary, the Board believes the appropriate leadership structure depends on the opportunities and challenges facing a company at a given time and that a one-size-fits-all approach to corporate governance, with a mandated independent Chair, would deprive the Company of the benefits of its current leadership structure and would not result in better governance or oversight.

Non-employee members of the Board regularly meet in executive session with no members of management

present. Each of the committees also meets regularly in executive session.

Every year, the Board and each of its committees evaluate and discuss their respective performance and effectiveness, as required by the Governance Guidelines. These evaluations cover a wide range of topics, including but not limited to, the fulfillment of

the Board and committee responsibilities identified in the Governance Guidelines and committee charters, which are posted on our website at www.travelers.com under For Investors: Corporate Governance.

As described on our website at www.travelers.com, interested parties, including shareholders, who wish to communicate with a member or members of the Board, including the Chairman of the Nominating and Governance Committee, the non-employee directors as a group, the Lead Director or the Audit Committee, may do so by addressing their correspondence as follows: if intended for the full Board or one or more non-employee directors, to the Lead Director; if

intended for the Lead Director, to Mr. John Dasburg; and if intended for the Audit Committee, to the Chairman of the Audit Committee. All such correspondence should be sent to the following address: c/o Corporate Secretary, The Travelers Companies, Inc., 385 Washington Street, Saint Paul, Minnesota 55102. The office of the Corporate Secretary will forward such correspondence as appropriate.

Enterprise Risk Management is a company-wide initiative that involves the Board and management identifying, assessing and managing risks that could affect our ability to fulfill our business objectives or execute our corporate strategy. Our Enterprise Risk Management activities involve the identification and assessment of a broad range of risks and the development of plans to mitigate their effects. The Risk Committee and the other committees of the Board, as well as our separate management-level enterprise risk and underwriting risk committees, are key elements of our enterprise risk management structure and help to establish and reinforce our strong culture of risk management. For example, having both a Board Risk Committee that oversees operational risks and the Company’s Enterprise Risk Management activities, and a management-level enterprise risk committee that reports regularly to the Board Risk Committee, enables a high degree of coordination between management and the Board. We describe our Enterprise Risk Management function in more detail in our Annual Report on Form 10-K, under “Business—Enterprise Risk Management”. We also discuss the alignment of our executive compensation with our risk management below under “Risk Management and Compensation”.

While the Risk Committee has oversight responsibility generally for our Enterprise Risk Management activities, the Board has allocated and delegated risk oversight responsibility to various committees of the Board in accordance with the following principles:

As a result, each committee charter contains specific risk oversight functions delegated by the Board, consistent with the principles set forth above. In that way, risk oversight responsibilities are shared by all committees of the Board and do not rest entirely with the Risk Committee. Further, we believe that

allocating responsibility to a committee with relevant knowledge and experience improves the oversight of risk.

The allocation of risk oversight responsibility may change, from time to time, based on the evolving needs of the Company. On at least an annual basis, the Board reviews significant risks that management, through its Enterprise Risk Management efforts, has identified. The Board then evaluates, and may change, the allocation among the various committees of oversight responsibility for each identified risk. Further, each committee periodically reports to the Board on its risk oversight activities. In addition, at least annually, the Company’s chief risk officer conducts a review of the interrelationships of risks and reports the results to the Risk Committee and the Board. These reports and reviews are intended to inform the Board’s annual evaluation of the allocation of risk oversight responsibility.

Our compensation structure is intended to encourage a careful balance of risk and reward, both on an individual risk basis and in the aggregate on a Company-wide basis, and promote a long-term perspective.

As discussed in more detail under “Compensation Discussion and Analysis” in this Proxy Statement, consistent with our goal of achieving a return on equity in the mid-teens over time, the Compensation Committee selected adjusted operating return on equity as the quantitative performance measure for the performance share portion of our stock-based long-term incentive program and as a component for determining amounts paid under our annual bonus program. Because operating return on equity is a function of both operating income and shareholders’ equity, it encourages senior executives, as well as other employees with management responsibility, to focus on a variety of performance objectives that are important for creating shareholder value, including the quality and profitability of our underwriting and investing activities and capital management.

In addition, the long-term nature of our stock-based incentive awards (which do not vest until three years

after the award), our significant executive stock ownership requirements and the fact that more than 40% of our named executive officers’ compensation in the aggregate was in the form of long- term, stock-based incentives in each of the last five years, including 2013, all encourage prudent enterprise risk management and discourage excessive risk taking to achieve short-term gains. Moreover, neither the long-term incentive awards nor annual bonuses require growth in revenues or earnings in order for our executives to be rewarded, and none of our executives are paid based on a formulaic percentage of revenues or profits. As a result of this and the mix of short- and long-term performance criteria, we believe that our executives are not incentivized to employ disproportionately risky growth strategies.

Furthermore, the Compensation Committee’s independent compensation consultant evaluates and advises the Compensation Committee as to the design and risk implications of our incentive plans and other aspects of our compensation programs to ensure that the mix of compensation, the balance of performance metrics and the overall compensation framework all support our short- and long-term objectives.

The Audit Committee has selected KPMG LLP (“KPMG”) to serve as our independent registered public accounting firm for 2014.

Although ratification is not required by our bylaws or otherwise, the Board is submitting the selection of KPMG to our shareholders for ratification because we value our shareholders’ views on the Company’s independent registered public accounting firm. If our shareholders fail to ratify the selection, it will be considered notice to the Board and the Audit Committee to consider the selection of a different firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.

Representatives of KPMG are expected to be present at the Annual Meeting. They also will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

The shares represented by your proxy will be voted “FOR” the ratification of the selection of KPMG unless you specify otherwise. KPMG has served as the independent registered public accounting firm of the Company (including The St. Paul Companies, Inc. (“St. Paul”) and its subsidiaries prior to its merger with Travelers Property Casualty Corp. (“TPC”) that formed the Company (the “Merger”)) since 1968 and of TPC and its predecessors from December 1993 until the Merger.

In connection with the audit of the 2013 financial statements, we entered into an agreement with KPMG which set forth the terms by which KPMG would perform audit services for the Company.

The following table presents fees for professional services rendered by KPMG for the audit of our financial statements for 2013 and 2012 and fees billed for other services rendered by KPMG for those periods:

The Audit Committee of the Board considered whether providing the non- audit services shown in this table was compatible with maintaining KPMG’s independence and concluded that it was.

Consistent with SEC policies regarding auditor independence and the Audit Committee’s charter, the

Audit Committee has responsibility for appointing, setting compensation for and reviewing the performance of the independent registered public accounting firm. In exercising this responsibility, the Audit Committee preapproves all audit and permitted non-audit services provided by the independent registered public accounting firm. Each year, the Audit Committee approves an annual budget for such permitted non-audit services and requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year. The Audit Committee has authorized our Chief Auditor to approve KPMG’s commencement of work on such permitted services within that budget, although the Chair of the Audit Committee must approve any such permitted non-audit service within the budget if the expected cost for that service exceeds $100,000. During the year, circumstances may arise that make it necessary to engage the independent registered public accounting firm for additional services that would exceed the initial budget. The Audit Committee has delegated the authority to the Chair of the Audit Committee to review such circumstances and to grant approval when appropriate. All such approvals are then reported by the Audit Committee Chair to the full Audit Committee at its next meeting.

YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF KPMG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2014.

The Audit Committee operates pursuant to a charter which is reviewed annually by the Audit Committee. Additionally, a brief description of the primary responsibilities of the Audit Committee is included under the heading “Board of Directors Information—Audit Committee” in this Proxy Statement. Under the Audit Committee charter, management is responsible for the preparation, presentation and integrity of the Company’s financial statements, the application of accounting and financial reporting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing the Company’s financial statements and expressing an opinion as to their conformity with U.S. generally accepted accounting principles. In addition, the independent registered public accounting firm is responsible for auditing and expressing an opinion on the Company’s internal controls over financial reporting.

In the performance of its oversight function, the Audit Committee reviewed and discussed the audited financial statements of the Company with management and with the independent registered public accounting firm. The Audit Committee also discussed with the independent registered public

accounting firm the matters required to be discussed by applicable standards adopted by the Public Company Accounting Oversight Board. In addition, the Audit Committee received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and discussed with the independent registered public accounting firm their independence.

Based upon the review and discussions described in the preceding paragraph, the Audit Committee recommended to the Board that the audited financial statements of the Company be included in the Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC.

Submitted by the Audit Committee of the Company’s Board of Directors:

The Company is requesting that shareholders vote, on a non-binding basis, to approve the compensation of our named executive officers as disclosed on pages 28 - 69. The Company currently intends to hold such votes annually. The next such vote will be held at the Company’s 2015 Annual Meeting of Shareholders. While the Board intends to consider carefully the results of this vote, the final vote is advisory only and is not binding on the Company or the Board.

The language of the resolution is as follows:

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion, is hereby APPROVED.

As described in this Proxy Statement, our executive compensation programs are structured consistent with our longstanding pay-for-performance philosophy and utilize performance measures that are intended to align compensation with the creation of shareholder value and to reinforce a long-term perspective. Among other things:

1.   A substantial majority of named executive officer compensation is performance-based, where vesting or the realization of value depends on operational results and/or changes in shareholder value over time. For the 2013 performance year, approximately 95% of total direct compensation (salary, bonus and equity) for our CEO was performance-based, and approximately 89% of the average 2013 total direct compensation for the other named executive officers was performance-based. In addition, more than 40% of the average total direct compensation for the named executive officers consisted of equity-based awards, in the form of performance shares and stock options, which incentivize long-term performance and vest after three years. Consistent with the foregoing, our compensation program de-emphasizes other non-performance-based elements of compensation like pension benefits and perquisites.

As illustrated in the chart in “Compensation Elements” on page 37, performance-based compensation represents a higher percentage of our CEO’s total direct compensation compared to the average for Compensation Comparison Group CEOs.

2.   Consistent with our pay-for-performance philosophy, while our compensation structure has been consistent over time, actual compensation has often increased or

decreased significantly from year to year, based on results. For example, in light of 2013’s record operating income per share and an operating return on equity of 15.5%—in each case significantly higher than the prior year results as well as the Company’s 2013 financial plan—the Compensation Committee increased the total direct compensation paid to the CEO and to the other named executive officers as a group for 2013 by 18% and 14%, respectively, over that paid for the 2012 performance year.

As illustrated in the charts in “Link Between Pay and Performance Over Time” on page 32, increases or decreases in total direct compensation generally correlate with changes in operating return on equity over the past five performance years.

3.    We have generated top tier results for our shareholders over time. Our “2013 Overview” in the Compensation Discussion and Analysis section highlights the Company’s strong absolute and relative results in 2013 and over time that the Compensation Committee considered in making its compensation decisions. For example, for the six-year period ended December 31, 2013 (which period began just prior to the financial crisis), our total shareholder return was above the 90th percentile of the Compensation Comparison Group (identified on page 36). In addition, our return on equity in 2013 and over time has been significantly better than the estimated average for the domestic property casualty insurance industry.

As illustrated in the chart in “Link Between Pay and Performance Over Time” on page 34, the performance of the Company over the past six years (that is, from before the financial crisis through 2013) compares favorably to our Compensation Comparison Group based on a number of financial measures, including total shareholder return and book value per share growth.

We believe that our strong performance in 2013 and over time has been the result of the successful execution of our long-term strategy, including proactive steps taken in the past several years to improve profitability. Further, we believe that our executive compensation program supports this strategy by encouraging our CEO and other named executive officers to focus on appropriate drivers of long-term, sustainable shareholder value.

YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION.

In 2013, the Company substantially increased its underwriting profits across all of its businesses and achieved record net and operating income per share* and an operating return on equity of 15.5%. Net and operating income per share as well as operating return on equity significantly exceeded comparable prior year results as well as goals in the Company’s 2013 financial plan that was approved by the Board prior to the start of the year. In particular, net income of $3.67 billion and operating income* of $3.57 billion produced record per share income that, in each case, was approximately 50% higher than both 2012 results and the 2013 financial plan.

These strong results reflected not only the relatively benign U.S. hurricane season during 2013 but also, in significant part, the continued successful execution of the Company’s long-term strategy to improve profitability and earn superior returns. Beginning in 2010 and continuing through 2013, the Company has taken a number of actions in response to the persistent low interest rate environment as well as the risk of continued high levels of severe weather in the United States. These actions have included: using the Company’s advanced data and analytics to selectively and actively increase premium rates on renewals of accounts, particularly accounts not meeting profitability thresholds; improving terms and conditions; and tightening underwriting guidelines. These actions have resulted in significantly improved underlying underwriting margins* (described in more detail on the next page). 2013 after-tax underlying underwriting margins were approximately $1.3 billion, almost three times 2011 underlying underwriting margins.

The Company also achieved its results in spite of the otherwise difficult interest rate environment in which it continued to operate during 2013. Although 10-year treasury rates increased somewhat during the second half of 2013, they remained at low levels throughout the year, which reduced interest income from the reinvestment of the Company’s maturing fixed income investments. Nevertheless, the Company’s success in increasing its underlying underwriting margins more than made up for this shortfall. In addition, although

*        For a definition of these terms and a reconciliation to GAAP measures, see “Reconciliation of Non-GAAP Measures to GAAP Measures and Selected Definitions” on page 88.

the U.S. insurance industry and the Company experienced lower catastrophe losses in 2013 as compared to recent years because of the relative absence of hurricanes and other significant tropical storms (such as Storm Sandy in 2012), 2013 catastrophe losses from other causes, such as tornado and hail storms, were still significant and exceeded long-term historical averages. The Company’s efforts over the past few years to manage its exposure in areas most vulnerable to catastrophes helped to reduce losses in 2013.

In assessing the Company’s performance, the Compensation Committee took into account the following achievements, among others: (1) the Company’s highly coordinated and effective execution of its business strategy, resulting in strong underwriting performance, including significant renewal rate increases in each of its segments and, at the same time, strong retention of renewal business; (2) the completion of the Company’s acquisition of The Dominion in Canada, which provides the Company with a significant platform for expanding its commercial insurance businesses in Canada; (3) continued strong investment performance, especially in light of historically low interest rates; and (4) continued effective and disciplined expense management and underwriting risk management. In addition, the Committee took into account the Company’s strategic actions to respond to changes in the personal auto insurance market, such as an increased customer focus on price, that have impacted the Company’s new business volumes. These strategic actions included, in particular, the development and launch of a new private passenger automobile product, Quantum Auto 2.0, which is designed to enable the Company to price its auto insurance offerings more competitively while generating an appropriate return.

In light of these achievements and other factors discussed below, the Compensation Committee increased total direct compensation (composed of base salary, annual cash bonus and long-term stock incentives) paid to the CEO and to the other named executive officers as a group for performance year 2013 by 18% and 14%, respectively, compared to 2012.

2013 Financial Performance Highlights

The Company’s consistent and articulated strategy has been to create shareholder value and to earn a top tier operating return on equity (mid-teens over time) by: (1) generating significant earnings; and (2) maintaining a balanced approach to capital management, including growing book value per share over time and returning to shareholders capital not needed to support the Company’s business. The Company strives to generate earnings from both its insurance operations and its investments, leveraging what it believes are its competitive advantages. In the case of insurance operations, the Company generates an underwriting gain when revenues from earned premiums and fees on insurance exceed expenses, such as incurred losses or other expenses relating to issuing and servicing our policies.

The Company was able to successfully execute its long-term strategy in 2013, as demonstrated by the following financial metrics.

·    Achieved Significantly Improved Margins Through Active Use of Data and Analytics.  In 2013, the Company continued its strategy in its commercial insurance businesses of analyzing its business on an account-by-account basis using highly granular data and analytics with the objective of retaining its best performing business while seeking rate increases where needed. As a result, the Company continued to achieve significant rate increases, particularly on accounts not meeting profitability thresholds, and at the same time maintained strong retention levels. The execution of this strategy, which started in 2010, has resulted in improved pricing and underwriting profitability, as illustrated by our presentation below of the most recent five years of our after-tax (1) “underwriting margin” or “underwriting gain (loss)” and (2) “underlying underwriting margin,” which is our “underwriting margin” excluding the impact of catastrophes and net favorable prior year reserve development.

·    Achieved a Superior Return on Equity.  In 2013, the Company’s improved profitability enabled it to produce a return on equity of 14.6% and an operating return on equity of 15.5%, as compared to 9.8% and 11.0%, respectively, in 2012. In contrast, the average return on equity for the domestic property and casualty industry in 2013 was less than 9%, as estimated by the Insurance Information Institute; this continues a consistent trend, starting even before the financial crisis, in which the Company’s return on equity each year has meaningfully exceeded the estimated average return for the industry. The Company’s 2013 return on equity exceeded approximately two-thirds of the companies in the Compensation Comparison Group described below. Further, the Company’s year-over-year increase in return on equity was greater than all but one member of the Company’s Compensation Comparison Group.

·    Increased Book Value per Share and Returned Significant Excess Capital to our Shareholders.  During 2013, we increased our book value per share by 4% and our adjusted book value per share, which excludes unrealized gains and losses on investments,

by 12%. Over the last decade, the compound annual growth rate of our book value per share was over 9%. We were able to achieve this significant book value growth while, at the same time, returning substantial capital to shareholders. Since 2006, we have returned $26.8 billion of capital to our shareholders through share repurchases and dividends, an amount that (1) represents nearly 75% of the Company’s market capitalization at the end of 2006 and (2) is greater than the capital returned by any other member of our Compensation Comparison Group. During 2013, we returned to shareholders over $3 billion through approximately $2.4 billion of share repurchases and $700 million of dividends.

·           Achieved Superior Total Return to Shareholders Over Time.  Strong financial results have led to superior returns, including total return to shareholders over time (measured as the change in the stock price plus the cumulative amount of dividends, assuming dividend reinvestment).

·           For the six-year period ended December 31, 2013, going back to just prior to the financial crisis (during which many companies in the Compensation Comparison Group experienced significant declines in their share price), our total shareholder return was above the 90th percentile of the Compensation Comparison Group.

·       For the five-year and three-year periods ended December 31, 2013, we generated total shareholder returns of 129% and 76%, respectively, placing the Company at the 55th percentile of its Compensation Comparison Group in each period.

·           For the one-year period ended December 31, 2013, our total shareholder return was 29%, which, while below the median of the Compensation Comparison Group, approximated the return on the Dow Jones Industrial Average (the Dow 30 index, of which the Company is a member) and the S&P 500 Index.

The following chart shows how: (1) the Company’s stock price has significantly outperformed the Compensation Comparison Group over time and (2) in contrast to many other members of the Compensation Comparison Group, the Company’s absolute level of shareholder returns in 2013 reflected a continuation of consistent strong performance rather than a recovery from a significant decline during the

financial crisis. Almost half of the Compensation Comparison Group members that had higher returns in 2013 still had stock prices at year-end that were below or only modestly above what they were prior to the financial crisis. For example, as of year-end 2013, the stock price of one company in the Compensation Comparison Group had increased approximately 900% from its financial crisis low but was still almost 60% below its high at the end of 2007. In contrast, the Company’s stock price, by the end of 2013, was almost 70% higher than its level at the end of 2007.

In assessing total shareholder return, the Compensation Committee generally gives greater weight to performance over a longer period of time, as a long-term perspective is necessary to execute the Company’s strategy, particularly in light of the inherent potential in the insurance industry for results to vary significantly year-to-year.

Pay for Performance Philosophy and 2013 Compensation Decisions

Our compensation program, the objectives and structure of which have been stable over time, is designed to reinforce a long-term perspective and to align the interests of our executives with our shareholders. A long-term perspective is especially vital in the property and casualty insurance industry, where the periodic occurrence of catastrophes, changes in estimates of costs for claims and other economic conditions have historically produced results that vary significantly when measured year-to-year.

Consistent with the Company’s longstanding pay-for-performance philosophy, the Compensation Committee believes that, when we generally exceed our performance goals and the named executive officers individually perform at superior levels in achieving that performance, total compensation for these executive

officers should be set at superior levels compared to the compensation levels for equivalent positions in the Compensation Comparison Group. When we do not generally exceed our performance goals or the named executive officers individually do not perform at superior levels, total compensation for these executives should be set at lower levels. In addition, to a greater extent than many of the companies included in the Company’s Compensation Comparison Group, a substantial majority of the ultimate value of our named executive officer compensation is driven by performance as measured by operating results and/or changes in shareholder value over time.

With respect to its 2013 compensation decisions, the Compensation Committee concluded that, based on the achievements discussed above, among other factors, the Company and the named executive officers had performed at superior levels on both an absolute and relative-to-peer basis. This was particularly the case in light of the Company’s strong 2013 results driven in significant part by proactive steps over the past several years to improve profitability. Among other things, the Committee also noted the Company’s strong total return to shareholders, particularly over the long-term.

In evaluating the Company’s strong financial results in 2013, including net and operating income per share that were approximately 50% higher than both 2012 results and the Company’s 2013 financial plan, the Compensation Committee considered that the Company’s 2013 results benefited meaningfully from lower catastrophes as compared to 2012. As explained under “Objectives of Our Executive Compensation Program,” the Committee believes that compensation levels should encourage a long-term perspective, and, therefore, while catastrophe levels should impact compensation levels, compensation levels should not be as volatile, from year-to-year, as changes in catastrophe levels. In order to mitigate the effect of fluctuations in catastrophe levels, the Compensation Committee contrasted the Company’s financial results in 2013 and 2009, two years in which catastrophe losses and earnings were generally similar. However, the Company’s earnings per share in 2013 were significantly higher than in 2009, due in large part to: (1) the favorable impact of the Company’s capital management through its share repurchase program; and (2) higher underlying underwriting margins that more than offset the impact of lower interest rates on investment income. Based on the foregoing comparisons, the Compensation Committee concluded that the Company’s 2013 performance was significantly better than its 2012 performance and generally equaled or exceeded its performance in 2009.

Considering all of these factors, in February 2014, the Compensation Committee decided to award variable

compensation (annual bonus and long-term stock incentives) for the 2013 performance year so that such compensation was meaningfully higher than 2012 compensation and comparable to or somewhat above 2009 compensation. This was also intended to position total direct compensation for the CEO and the other named executive officers as a group significantly above the median (in the top quartile) of the Compensation Comparison Group (based on 2012 compensation data, the most recent year public information was available).

Specifically, the Compensation Committee made the following compensation decisions with respect to the 2013 fiscal year:

·           The annual cash bonus paid to the CEO and the average annual cash bonus paid to the other named executive officers as a group for the 2013 performance year increased by 15% and 16%, respectively, from 2012. Compared to 2009, the CEO’s bonus was unchanged, and the average bonus for the other named executive officers increased by 7%.

·           The grant date fair value of stock-based long-term incentive compensation awarded to the CEO and the average grant date fair value of stock-based long-term incentive compensation awarded to the other named executive officers for the 2013 performance year increased by 22% and 13%, respectively, from 2012. Compared to 2009, the CEO’s equity awards were unchanged, and the average equity awards for the other named executive officers increased by 17%.

In addition, the Compensation Committee decided not to make any changes to the base salaries for the named executive officers. The base salary for the CEO has remained unchanged since 2001.

Agreement by CEO to Relinquish Contractual Rights under His Employment Agreement

In consultation with our Compensation Committee, our CEO has voluntarily agreed to permanently relinquish his previously negotiated contractual rights to receive (1) annual equity grants with a minimum value of $6.25 million and (2) potential “gross up” payments on any excise taxes that may be imposed for “excess parachute payments” under Section 4999 of the Internal Revenue Code. Accordingly, on a prospective basis, the size of our CEO’s annual equity grants will be solely as determined by the Compensation Committee in its discretion, and our CEO will be ineligible to receive any excise tax gross up payments in connection with any future change of control transaction.

Relationship between CEO Compensation and Operating Return on Equity

The following two charts illustrate the directional relationship between total direct compensation for the CEO and Company performance, as reflected by operating return on equity, with respect to the past five performance years (PY).

As indicated below, compensation levels vary significantly from year to year and correlate with returns.

Further, as noted below under “Objectives of our Executive Compensation Program”, compensation levels are impacted by the level of catastrophe losses (CATs) in any particular year but are not subject to as much volatility year-to-year—negative or positive—as may be caused by the presence or absence of catastrophes.

Use of Operating Return on Equity and Other Metrics

While the Compensation Committee evaluates a broad range of financial and non-financial metrics in awarding performance-based annual cash bonuses, operating return on equity, in particular, is a principal factor in the Compensation Committee’s evaluation of the Company’s performance. For example, the Committee uses operating return on equity in its evaluation of performance when it determines the annual cash bonuses paid to the named executive officers. Moreover, as discussed below, the number of performance shares that a named executive officer will receive upon vesting, if any, depends on the Company’s attainment of specific financial goals related to operating return on equity. The Committee believes that operating return on equity should not be viewed as a single metric. Rather, by being a function of both (1) operating income and (2) shareholders’ equity (excluding unrealized gains and losses on investments), operating return on equity reflects a number of separate areas of financial performance related to both the Company’s income statement and balance sheet. Accordingly, senior executives, as well as other employees with management responsibility, are encouraged to focus on multiple performance objectives that are important for creating shareholder value, including the quality and profitability of our underwriting and investment decisions, the pricing of our policies, the effectiveness of our claims management and the efficacy of our capital and risk management.

In addition to operating return on equity, the Compensation Committee also reviews a broad range

of other financial and non-financial metrics, particularly with respect to the administration of the Company’s performance-based annual cash bonus program. As discussed further below, in determining annual cash bonuses to be paid to the named executive officers, the Compensation Committee evaluates the Company’s performance with respect to a wide range of metrics included in the financial plan approved by the Board, including, among others, operating income and operating income per share along with other metrics that contribute to those results, such as written and earned premiums, investment income, insurance losses and expense management. In evaluating performance against the objectives, however, no formula or pre-determined weighting was used, and no one objective was individually material other than operating return on equity.

The Committee also reviews book value per share growth over time in light of its objective, discussed above, to create shareholder value by generating significant earnings and taking a balanced approach to capital management. However, because (1) book value can be volatile due to, among other things, the impact of changing interest rates on the fair value of the Company’s fixed-income portfolio and (2) the Company’s capital management strategy also emphasizes returning excess capital to shareholders, the Committee does not set a specific target for book value per share growth. Further, while it evaluates changes in book value per share in the context of overall results, the Company does not believe such changes, by themselves, are always dispositive indicators of relative performance.

Relationship between CEO Compensation and Relative Performance over the Last Six Years of Available Data

The following chart demonstrates the Company’s performance as compared to the other companies in its Compensation Comparison Group over the six-year period ended December 31, 2013 based on a number of different metrics that the Compensation Committee believes are relevant to consider in assessing performance over time. While the Committee considers both absolute and relative performance in respect of all of these metrics, no one metric is dispositive, especially given that differences in industry, business mix and capital structure can impact comparability.

The chart also shows our CEO’s total compensation compared to total compensation paid to the CEOs of our Compensation Comparison Group for the six-year period from 2007 through 2012, the most recent six years for which comparative compensation information was available when the Compensation Committee approved this report.

The Compensation Committee viewed six years as a relevant measurement period because the starting point would be prior to the most disruptive year of the financial crisis, and, thus, comparisons would be more meaningful for evaluating sustained performance over the long-term.

For purposes of this chart, “total compensation” reflects total compensation as reported in the SEC summary compensation tables in the Company’s and the peer group’s proxy statements that were prepared for the relevant years. “Return of Capital” is the cumulative amount of dollars spent on share repurchases and cash dividend payments over the specified time period. For a definition of some of the other terms used in the chart below, see “Reconciliation of Non-GAAP Measures to GAAP Measures and Selected Definitions” on page 88 of this Proxy Statement.

The Compensation Committee has approved the following five primary objectives of our executive compensation program.

1.              Link compensation to the achievement of our short- and long-term financial and strategic objectives

The Compensation Committee believes that a properly structured compensation system should measure and reward performance on multiple bases. To ensure an appropriate degree of balance in the program, the compensation system is designed to

measure short- and long-term financial and operating performance, the efficiency with which capital is employed in the business, the effective management of risk, the achievement of strategic initiatives and the individual performance of each executive.

The Compensation Committee further believes that an executive’s total compensation opportunity should be commensurate with his or her position and level of responsibility. Accordingly, the proportion of total compensation that is performance-based increases with successively higher levels of responsibility. Thus,

the senior-most executives who are responsible for the development and execution of our strategic and financial plans have the largest portion of their compensation tied to performance-based incentives, including equity-based compensation, the ultimate value of which is completely or partly dependent on changes in stock price and operating return on equity.

In evaluating the Company’s overall performance, the Compensation Committee recognizes that our business is subject to events outside of management’s control, including natural and man-made catastrophic events, and takes those events into account when awarding compensation. The Compensation Committee believes that, while the impact of catastrophes in any given year can produce significant volatility, management should be focused on achieving the Company’s long-term strategic goals. As a result, although the Compensation Committee believes that the impact of catastrophes on the Company’s financial results should be reflected in its executive compensation decisions, the Compensation Committee does not believe it is appropriate for compensation levels to be subject to as much volatility year-to-year as may be caused by actual catastrophes.

2.            Provide competitive compensation opportunities to attract, retain and motivate high-performing executive talent

Our overall compensation levels are designed to attract and retain the best executives in light of the competition for executive talent. In addition, the Compensation Committee believes that, when we generally exceed our performance goals and the named executive officers individually perform at superior levels in achieving that performance, total compensation for these executive officers should be set at superior levels compared to the compensation levels for equivalent positions in the Compensation Comparison Group. When we do not generally exceed our performance goals or the named executive officers individually do not perform at superior levels, total compensation for these executives should be set at lower levels.

The Compensation Committee may also take into account other relevant facts and circumstances in awarding compensation in order to attract, retain and motivate high performing talent.

3.              Align the interests of management and shareholders by paying a substantial portion of total compensation in equity-based incentives and ensuring that executives accumulate meaningful stock ownership stakes over their tenure

The Compensation Committee believes that the interests of executives and shareholders should be aligned. Accordingly, a significant portion of the total compensation for the named executive officers is in the form of stock-based compensation that does not vest until three years after the award is made. The

components of stock-based compensation granted to the named executive officers in 2013 and 2014 were stock options and performance shares. In addition, as discussed below, senior executives are expected to achieve specified stock ownership targets prior to selling any stock acquired upon the exercise of stock options or the vesting of performance shares or restricted stock units. The portion of total compensation attributable to stock-based programs, and the expected level of executive stock ownership, increase with successively higher levels of responsibility.

4.              Maximize, to the extent equitable and practicable, the financial efficiency of the overall compensation program from tax, accounting, cash flow and share dilution perspectives

We make reasonable efforts to maximize the tax deductibility of all elements of compensation. Section 162(m) of the Internal Revenue Code prohibits us from deducting compensation in excess of $1 million paid to most of the named executive officers, unless specified requirements are met, including that such amounts be considered “qualified performance-based compensation” under Section 162(m). The Compensation Committee may also approve compensation that does not qualify for a deduction under Section 162(m) if it determines that it is appropriate to do so in light of other competing interests and goals, such as the attraction and retention of key executives.

As part of the process of approving the initial design of incentive plans, or any subsequent modifications made to such plans, and determining awards under the plans, the Compensation Committee also evaluates the aggregate economic costs and dilutive impact to shareholders of such compensation, the expected accounting treatment and the impact on our financial results. The Compensation Committee attempts to balance the various financial implications of each program to ensure that the system is as efficient as possible and that unnecessary costs are avoided.

5.              Reflect established and evolving corporate governance standards

The Compensation Committee, with the assistance of our Human Resources Department and the Committee’s independent compensation consultant, stays abreast of current and developing corporate governance standards and trends with respect to executive compensation and adjusts the various elements of our executive compensation program, from time to time, as it deems appropriate.

For a description of the duties of the Compensation Committee and its use of an independent compensation consultant, see “Board of Directors Information—Compensation Committee” on page 11 of this Proxy Statement.

The Compensation Comparison Group includes (1) our key competitors in the property and casualty insurance industry and (2) general financial services and life and health insurance companies that in general are of relatively similar size and complexity. We regard these general financial services and life and health insurance companies as potential competition for executive talent. The Compensation Comparison Group has not changed since 2009; however, the Compensation Committee reviews the composition of our peer group annually to ensure that the companies constituting the peer group continue to provide meaningful and relevant compensation comparisons.

The Compensation Comparison Group consisted of the following companies in the property and casualty insurance business:

·           ACE Ltd.

·           Allstate Corporation

·           Chubb Corporation

·           Hartford Financial Services Group

·           Progressive Corporation

The Compensation Comparison Group also included the following general financial services and life and health insurance companies:

·           Aetna, Inc.

·           American Express

·           CIGNA Corporation

·           Manulife Financial Corporation

·           MetLife Inc.

·           Prudential Financial Inc.

As of December 31, 2013, the Company was in approximately the 46th percentile of the Compensation Comparison Group based on assets, the 36th percentile based on revenues and the 55th percentile based on market capitalization.

We deliver executive compensation through a combination of base salary and performance-based compensation consisting of an annual cash bonus and stock-based, long-term incentive awards. We also provide benefits and modest perquisites. Total direct compensation for a performance year consists of base salary, along with annual cash bonuses earned and stock-based long-term incentive awards granted to our named executive officers in February of each year with respect to their performance in the prior year.

Consistent with recent years, the Compensation Committee has determined that the allocation of compensation between performance-based annual cash bonus and stock-based long-term incentives should be somewhat more heavily weighted towards cash bonus as compared to the Compensation Comparison Group. The Compensation Committee believes that this allocation is appropriate in light of the fact that a higher percentage of the named executive officers’ total compensation (and total direct

compensation) is performance-based as compared to the peer average and peer median of the Compensation Comparison Group. In particular, unlike a number of other companies in the Compensation Comparison Group, equity awards made to the named executive officers are all performance-based. In addition, a smaller portion of our compensation opportunity is delivered through non-performance-based pension benefits and perquisites. The components of stock-based compensation are in the form of stock options and performance shares. Because our performance shares only vest if adjusted return on equity thresholds are met, and because options provide value only if our stock price appreciates, the Compensation Committee believes that such compensation is all performance-based; that is, the compensation awarded to our CEO and other named executive officers does not include awards, such as restricted stock, where compensation is earned solely due to the passage of time without regard to performance.

The following chart illustrates the mix of performance-based compensation to non-performance-based compensation of our CEO compared to the CEOs of our Compensation Comparison Group.

(1)          Travelers CEO Pay Mix reflects the pay mix of total direct compensation for performance year 2013, as reported in the Supplemental Table on page 50 of this Proxy Statement.

(2)          Peer Average CEO Pay Mix reflects the pay mix of total direct compensation for the Compensation Comparison Group for performance year 2012 (the most recent year for which data was publicly available) and was calculated for the Compensation Committee by its independent compensation consultant. As part of that calculation, the independent compensation consultant annualized special non-recurring long-term incentive grants (for example, new hire, retention and promotion awards) to reflect an estimate of “per year” value.

The following table sets forth the composition of total direct compensation for the CEO and our other named executive officers for the 2013 performance year:

Base Salary

The Compensation Committee generally sets base salary for executive officers at a level that is intended to be on average at, or near, approximately the 50th percentile for equivalent positions in the Compensation Comparison Group. This positioning is targeted because, among other things, it helps us to attract and retain high-quality talent and enables us to grant the substantial majority of our named executive officers’ compensation in the form of variable performance-based compensation.

Individual salaries may range above or below the median based on a variety of factors, including the potential impact of the executive’s role at the Company, the terms of the executive’s employment agreement, if any, the experience the executive brings to the position and the performance and potential of the executive in his or her role. Base salaries are

reviewed annually, and adjustments are made from time to time as the Compensation Committee deems appropriate to recognize performance, changes in duties and/or changes in the competitive marketplace.

Further, because salaries for executive officers are typically changed infrequently, at the time the Compensation Committee increases the salaries of executives who have not received an increase in several years, such salaries on average may, initially and for a period of time following such increases, be higher than the 50th percentile indicated by the most recently available data on the basis that over time the average is expected to be at, or near, approximately the 50th percentile.

In February 2014, the Compensation Committee did not make any changes to the base salaries for the named executive officers. The Committee last changed base salaries for Mr. Benet, Mr. Heyman and Mr. Schnitzer in April 2013 and for Mr. MacLean in July 2012. The base salary for the CEO has remained unchanged since 2001. For 2013, the base salaries paid to named executives as a group were at approximately the 70th percentile of the Compensation Comparison Group, based on the most recently available data (but only approximately 9% more than the median dollar amount). The CEO’s 2013 base salary of $1,000,000 was at approximately the 10th percentile of the Compensation Comparison Group. The salaries paid to the other named executive officers in 2013 were within the top two quartiles of the Compensation Comparison Group, based on 2012 data for the Group, the most recently available.

Performance-Based Annual Cash Bonus

The named executive officers are eligible to earn performance-based annual cash bonuses under the Senior Executive Performance Plan, a plan approved by our shareholders in 2002. The annual bonuses are based upon the individual performance of each executive as well as that of the Company as a whole. These bonuses are intended to motivate and promote the achievement of our operating performance objectives and strategic initiatives that are important to our success, as well as individual contributions toward those ends.

In determining bonuses under the Plan, the Compensation Committee takes the following steps, as described in the various sections below:

1.              Determine maximum pool of bonuses that can be awarded under the Plan as “performance-based compensation” under Section 162(m) of the Internal Revenue Code, as described below under “Description of Senior Executive Performance Plan and Maximum Pool”; and

2.              Determine the extent to which the Committee should exercise “negative discretion” and award amounts less than maximum permitted under the Plan. In exercising this discretion and setting the amount of bonuses, the Committee:

·        Considers multiple factors, using its business judgment, as described below under “Factors Considered in Awarding 2013 Bonuses”; and

·     Focuses, among other things, on the Company’s performance in respect of multiple financial metrics that were included as part of the 2013 financial plan, in particular targets relating to operating return on equity. This is described below under “2013 Financial Metrics, Including Operating Return on Equity Target”.

Description of Senior Executive Performance Plan and Maximum Pool

The Senior Executive Performance Plan is designed to comply with the “qualified performance-based compensation” requirements of Section 162(m) of the Internal Revenue Code so that the annual bonus payments to named executive officers could be fully tax deductible.

The Senior Executive Performance Plan contains a multi-metric formula that was approved by

shareholders and that is used to determine the maximum amount of the annual bonus pool. Because the amount of our after-tax operating earnings can generate a larger bonus pool than necessary for awarding bonuses consistent with the Compensation Committee’s objectives, the Compensation Committee can exercise (and in the past has always exercised) its discretion to award less than the maximum amount that could have been awarded under the Plan as “qualified performance-based compensation”.

The formula in the Senior Executive Performance Plan provides generally that, if our return on equity (determined by dividing (1) “after-tax operating earnings”, as defined in the Senior Executive Performance Plan, by (2) total common shareholders’ equity as of the beginning of the fiscal year, adjusted to exclude net unrealized appreciation or depreciation of investments) is greater than 8%, then the pool available to pay as “qualified performance-based compensation” under Section 162(m) will equal 1.5% of our “after-tax operating earnings”.

Performance-Year 2013 Bonuses Payable under the Senior Executive Performance Plan

As it has done in prior years, the Compensation Committee exercised its discretion to award less than the maximum amount that could have been awarded under the Plan as “qualified performance-based compensation”. As discussed below, the Compensation Committee awarded a total of $21 million in bonuses (being approximately 34% of the bonus pool under the Plan) to the named executive officers for the 2013 performance period.

Factors Considered in Awarding 2013 Bonuses

In determining the actual annual bonuses awarded, the Compensation Committee applied its business judgment and considered a number of factors, including:

·      Company, business segment and/or investment results relative to the various financial measures set forth in our 2013 business plan that was established and approved by the Board at the end of 2012;

·        the performance of the executive;

·      compensation market practices as reflected by the Compensation Comparison Group in the most recent publicly available data;

·      our performance relative to the companies in the Compensation Comparison Group along with other companies in the property and casualty industry, with a particular emphasis on operating return on equity; and

·        past awards to the executive.

In determining these bonuses, the Compensation Committee also considered additional qualitative factors, such as:

·        the strategic positioning of the Company and the applicable business unit;

·      the progress made on strategic initiatives, such as international expansion, improving underlying underwriting profitability across the business segments and increasing the competitiveness of the Company’s personal auto business;

·        the effective management of expenses;

·        the effective management of risk;

·        the demonstration of leadership, teamwork and innovation; and

·        the extent of accomplishment of the applicable business unit’s business plan.

With regard to CEO performance, the Compensation Committee also considered his development of management depth and succession plans.

The achievement, or inability to achieve, any particular financial or operational measure in a given year neither guarantees nor precludes the payment of an award but is considered by the Compensation Committee as one of several factors in light of the other factors noted and any additional information available to it at the time, including market conditions in general. The Compensation Committee does not use a formula or assign any particular relative weighting to any performance measure. However, as discussed below, the Compensation Committee generally weighs financial performance measures (particularly operating return on equity) and comparable compensation information more heavily than other factors. In particular, when assessing results, the Compensation Committee considers the Company’s overall financial performance relative to prior years’ performance, the business plan and the performance of industry peers.

The Compensation Committee believes that a formulaic approach to compensation, particularly in the property and casualty insurance industry, could result in unintended consequences and is not an appropriate substitute for the Compensation Committee’s thorough deliberation and business judgment. The Compensation Committee’s current approach allows it to appropriately assess the quality of performance results and ensures that executives are not unduly rewarded, or disadvantaged, based purely on mechanical formulas.

2013 Financial Metrics, Including Operating Return on Equity Target

In evaluating the foregoing factors, during 2013, the Compensation Committee reviewed management’s progress in meeting a broad range of financial and operational metrics included in the financial plan approved by the Board in December 2012. Of the various financial metrics evaluated by the Compensation Committee, the Committee considered operating return on equity to be the most important metric in its evaluation of the Company’s performance, and it reviewed other metrics in light of their contribution to the Company’s return on equity goals.

Operating Return on Equity Target.  The Compensation Committee established in February 2013 specific targets for both: (1) operating return on equity; and (2) operating return on equity adjusted to exclude catastrophes and prior year reserve development related to asbestos and environmental coverages.

One of management’s important responsibilities is to produce an appropriate return on equity for our shareholders and to develop and execute financial and operational plans consistent with our financial goal of achieving a mid-teens operating return on equity over time. The Compensation Committee also recognizes, however, the historic cyclicality of our business and that there may be times when the operating return on equity achievable in a given year is greater than, or less than, a mid-teens level. The targeted returns for 2013 reflected the expectation that interest rates would remain at historically low levels during the next several years. In addition, in evaluating the appropriateness of the targets set for operating return on equity, the Compensation Committee considers our operating return on equity relative to the Compensation Comparison Group and to the U.S. property and casualty industry generally and relative to our estimated cost of equity capital. As a result, when the

Board approved our 2013 business plan, both management and the Board believed the plan to be reasonably difficult to achieve.

The financial plan targeted: (1) an operating return on equity of 10.7%; and (2) an operating return on equity, adjusted to exclude catastrophes and prior year reserve development related to asbestos and environmental coverages, of approximately 13.5%. The adjustments to operating return on equity for prior year reserve developments related to asbestos and environmental coverages were made because, to a significant degree, those items relate to policies that were written decades ago and, particularly in the case of asbestos, arise to a significant extent as a result of court decisions and other trends that have attempted to expand insurance coverage far beyond what we believe to be the intent of the original parties. Accordingly, the financial impact is largely beyond the control of current management.

For 2013, our results compared to our targets were as follows:

·      Our operating return on equity was 15.5%, which was significantly more than our target of 10.7%.

·      Our adjusted operating return on equity, excluding catastrophes and prior year reserve development related to asbestos and environmental coverages, was 17.7%, which was significantly more than our target of 13.5%.

Other Financial Metrics.  The Senior Executive Performance Plan is a multiple metric plan. In determining annual cash bonuses to be paid to the named executive officers, the Compensation Committee evaluates the Company’s performance with respect to not only operating return on equity, but also a broad range of other financial metrics including, among other things, operating income and operating income per share and other metrics that contribute to those amounts, such as written and earned premiums, investment income, insurance losses and expense management. No one of these other financial metrics was individually material to 2013 compensation decisions.

The relevant targets were consistent with the 2013 financial plan approved by the Board at the end of 2012 and, in general, the Company’s performance substantially exceeded those targets. To give two examples, the targets for operating income per share and operating income were $6.35 per share and $2.4 billion, respectively, which the Company

substantially exceeded in 2013 by achieving $9.46 of operating income per share and $3.6 billion of operating income.

Reasons for Performance in Excess of Financial Targets.  The Compensation Committee believes that the Company’s performance in 2013, which was substantially in excess of applicable targets, reflected among other things:

·      solid underlying underwriting performance and improving profitability, including as the result of the Company’s strategic actions, beginning in 2010 and continuing through 2013, to improve that profitability;

·      catastrophe losses that were significantly below the historically high levels of recent years and amounts assumed in the 2013 financial plan;

·      favorable prior year reserve development not related to asbestos and environmental matters;

·      solid investment performance, especially in light of historically low interest rates; and

·      the favorable impact of the Company’s capital management, particularly its share repurchase program.

In addition, the Compensation Committee believes the results reflect superior performance relative to the U.S. property and casualty industry as a whole. In particular, the Company’s return on equity of 14.6% in 2013 meaningfully exceeded the average return on equity for domestic property and casualty insurance companies, which was less than 9%, as estimated by the Insurance Information Institute.

*  *  *

Amount of 2013 Annual Cash Bonuses

At its February 2014 meeting, the Compensation Committee considered the quantitative and qualitative factors described above and the substantial contributions made by the named executive officers in exceeding the 2013 targets described above. This included the strong absolute and relative performance described under “2013 Overview”, including strong total returns to shareholders over time. The Compensation Committee believed that all of the named executive officers individually performed at superior levels and contributed substantially to our

results. The Compensation Committee also placed significant weight on the fact that the executive officers, including the named executive officers, were highly effective working as a team. The cash bonus for the CEO in particular recognizes his Company and industry leadership, strategic vision and oversight of the successful implementation of the long-term strategy, his ability to attract, retain and motivate a strong senior management team and, more broadly, his cultivation of an effective corporate culture that prioritizes a proper balance of risk and reward. The cash bonus amounts for the other named executive officers recognize their superior individual performances and the scope of their respective responsibilities, which, in several cases, had increased in recent years.

In light of the foregoing, the Compensation Committee determined in its judgment to award a cash bonus of $7.5 million to the CEO and, as set forth in more detail on page 50 under “Total Direct Compensation for 2011-2013”, an average cash bonus of $3.375 million to the other named executive officers. These bonuses, which were meaningfully higher than bonuses for the 2012 performance year, were set at levels that were the same or somewhat higher than those awarded for the 2009 performance year. The relative positioning of 2013 compensation versus 2012 and 2009 compensation and the related rationale are described in more detail under “2013 Overview”.

Given the Company’s superior performance, the bonuses were also intended to position total direct compensation for the CEO and the named executive officers as a group significantly above the median (in the top quartile) of the Compensation Comparison Group (based on 2012 compensation data, the most recent data publicly available).

Performance-Based Long-Term Stock Incentives

As described below, in 2013, performance-based long-term compensation was awarded to the named executive officers in the form of stock options and performance shares. Our stock-based long-term incentive awards are designed to further our goals described under “Objectives of Our Executive Compensation Program”, including ensuring that our executive officers have a continuing stake in our long-term success and manage the business with a long-term risk-adjusted perspective.

At its February 2013 meeting, the Compensation Committee awarded the CEO stock-based long-term incentive grants with a grant date fair value of

$9 million in respect of his 2012 performance. At the same meeting, the Compensation Committee awarded the named executive officers (other than the CEO) stock-based long-term incentive grants of 3.25 times the base salary for those officers in effect at the end of the year. The Compensation Committee set the amounts of such incentive grants in order to position the total direct compensation of the CEO and other named executive officers as a group at levels that approximated, but were slightly higher than, 2010 levels, a year with a similar operating environment. Given the Company’s superior performance in 2012, these equity awards were also intended to position total direct compensation for the CEO and the named executive officers as a group above the median of the Compensation Comparison Group.

At its February 2014 meeting, the Compensation Committee awarded the CEO stock-based long-term incentive grants with a grant date fair value of $11 million in respect of his 2013 performance. At the same meeting, the Compensation Committee awarded the named executive officers (other than the CEO) stock-based long-term incentive grants of 3.5 times the base salary for those officers in effect at the end of the year. The Compensation Committee set the amounts of such incentive grants in order to position the total direct compensation of the CEO and other named executive officers as a group at levels that were meaningfully higher than 2012 levels and the same or somewhat higher than 2009 levels. This relative positioning and the related rationale are described in more detail under “2013 Overview”. Given the Company’s superior performance, these equity awards were also intended to position total direct compensation for the CEO and the named executive officers as a group significantly above the median (in the top quartile) of the Compensation Comparison Group (based on 2012 compensation data, the most recent data publicly available).

The ultimate value of stock-based long-term incentive awards at the time of vesting or, in the case of stock options, exercise may be greater than or less than the grant date fair value, depending upon our operating performance and changes in the value of our stock price. Unless otherwise noted, the grant date fair values of long-term incentive awards are computed in accordance with the accounting standards described in footnote (2) to the Summary Compensation Table on page 52.

The Compensation Committee, with advice from its independent compensation consultant, developed

guidelines for the allocation of annual grants of equity compensation between performance shares and stock options. These allocations are intended to result in a mix of long-term incentives that is sufficiently performance-based and will result in: (1) a large component of total compensation being tied to the achievement of specific, multi-year operating performance objectives and changes in shareholder value (performance shares); and (2) an appropriate portion being tied solely to changes in shareholder value (options). Under the guidelines, the mix of long-term incentives for the named executive officers is approximately 60% performance shares and 40% stock options, based on the grant date fair value of the awards. The mix of long-term incentive compensation reflects the Compensation Committee’s judgment as to the appropriate balance of these incentives to achieve its objectives. While the aggregate grant date fair values of equity awards granted to named executive officers take into account both individual and Company performance, the mix of equity incentives does not. For details of the equity awards granted in calendar year 2013, refer to the “Tabular Executive Compensation Disclosure—Grants of Plan-Based Awards in 2013” on page 54.

Performance Shares

Under our program for granting performance shares, we may grant performance shares to certain of our employees who hold positions of vice president (or its equivalent) or above, including the named executive officers. These awards provide the recipient with the right to receive a variable number of shares of our common stock based upon our attainment of specified performance goals discussed below. The performance goals for performance share awards granted in 2013 and 2014 are based upon our attaining various adjusted returns on equity over three-year performance periods commencing January 1, 2013 and ending December 31, 2015 and commencing January 1, 2014 and ending December 31, 2016, respectively (in each case, “Performance Period Return on Equity”). Performance Period Return on Equity represents the average of the “Adjusted Return on Equity” for each of the three calendar years in the Performance Period Return on Equity. The “Adjusted Return on Equity” for each calendar year is determined by dividing “Adjusted Operating Income” by “Adjusted Shareholders’ Equity” for the year, as defined below.

“Adjusted Operating Income”, as defined in the Performance Share Awards Program, excludes the after-tax effects of:

·        specified losses from officially designated catastrophes,

·        asbestos and environmental reserve charges or releases,

·      net realized investment gains or losses in the fixed maturities and real estate portfolios,

·        extraordinary items, and

·      restructuring charges and the cumulative effect of accounting changes and federal income tax rate changes, each as defined by GAAP, and each as reported in our financial statements (including accompanying footnotes and management’s discussion and analysis);

and is then reduced by the after-tax dollar amount for expected “normal” catastrophe losses. In the first year of the performance period, such expected “normal” catastrophe losses are represented by a fixed amount set forth in the terms of the performance shares ($645 million for 2013). In the two subsequent years of the performance period, such fixed amount for catastrophes is adjusted up or down by formula to reflect any increases or decreases, as the case may be, in written premiums in certain catastrophe-exposed commercial and personal lines.

“Adjusted Operating Income” is also reduced by an amount reflecting the historical level of credit losses (on an after-tax basis) associated with our fixed income investments. The Compensation Committee believes this reduction of “Adjusted Operating Income” is appropriate because credit losses in our fixed income portfolio are part of reported net income but not operating income and thus, absent making this reduction, would not be reflected in “Adjusted Operating Income”. Specifically, for performance share awards granted in February 2013 and February 2014, the annual reduction is determined by multiplying a fixed factor (expressed as 2.25 basis points) by the amortized cost of the fixed maturity investment portfolio at the beginning of each quarter during the relevant year in the performance period and adding such amounts (on an after-tax basis) for each year in the performance period.

“Adjusted Shareholders’ Equity” for each year in the performance period is defined in the Performance Share Awards Program as the sum of our total common shareholders’ equity, as reported on our balance sheet as of the beginning and end of the year (excluding net unrealized appreciation or depreciation of investments and adjusted as set forth in the immediately following sentence), divided by two. In calculating Adjusted Shareholders’ Equity, our total common shareholders’ equity as of the beginning and end of the year is adjusted to remove the cumulative after-tax impact of the following items during the performance period: (1) discontinued operations and (2) the adjustments and reductions made in calculating Adjusted Operating Income.

The Compensation Committee selected Performance Period Return on Equity as the performance measure in the Performance Share Plan because the Compensation Committee believes it is the best measure of return to shareholders and efficient use of capital over a multi-year period, as described further above under “Link Between Pay and Performance Over Time”.

The Compensation Committee seeks to establish the Performance Period Return on Equity standards such that 100% vesting requires a level of performance over the performance period that is expected to be in the top tier of the industry. In considering what would constitute such top tier performance over a future three-year period, the Compensation Committee considers the recent and more historical trends in operating return on equity of the property and casualty insurance industry, our Compensation Comparison Group and the Company, as well as current and expected underwriting and investment market conditions, our business plan and the Company’s cost of equity capital. For example, the Committee noted in 2014 that the Performance Period Return on Equity standard required for 100% vesting would meaningfully exceed the average return on equity for the domestic property and casualty industry, as estimated by the Insurance Information Institute for 2013, a year in which there were relatively low catastrophe levels. Accordingly, while the Compensation Committee decided not to implement a formulaic calculation based on relative performance, which it believed could result in over or under compensation, it did set the Performance Period Return on Equity Standards after considering the level of historical and expected performance that would constitute superior returns. In addition, in establishing the Performance Period Return on Equity shown in the

chart below, the Compensation Committee also considered our financial goal of achieving an operating return on equity in the mid-teens over time and that such an operating return on equity would, in its view, be reasonably difficult to achieve over the next three-year period.

For performance shares granted in 2013 and 2014, actual distributions are contingent upon our attaining Performance Period Return on Equity as indicated on the following chart. Performance falling between any of the identified points in the applicable chart below will result in an interpolated vesting (for example, for shares granted in 2013, a Performance Period Return on Equity of 13% will yield a vesting of 115%).

Performance Shares Granted in 2013 and 2014: Performance Period Return on Equity Standard