TRAVELERS COMPANIES, INC.TRV
TRAVELERS COMPANIES, INC. Stock Compensation Disclosure
SHARE-BASED INCENTIVE COMPENSATION
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The Company has a share-based incentive compensation plan, The Travelers Companies, Inc. Amended and Restated 2023 Stock Incentive Plan (the 2023 Incentive Plan), the purposes of which are to align the interests of the Company’s non-employee directors, executive officers and other employees with those of the Company’s shareholders and to attract and retain personnel by providing incentives in the form of share-based awards. The 2023 Incentive Plan permits grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock, deferred stock units, performance awards and other share-based or share-denominated awards with respect to the Company’s common stock. The Company has a policy of issuing new shares to settle the exercise of stock option awards under the various settlement alternatives allowed under the 2023 Incentive Plan, and the vesting of other equity awards.
In connection with the adoption of the 2023 Incentive Plan, The Travelers Companies, Inc. Amended and Restated 2014 Stock Incentive Plan, as amended (the 2014 Incentive Plan) was terminated, joining several other legacy share-based incentive compensation plans that had been terminated in prior years (together, the legacy plans). Outstanding grants were not affected by the termination of the legacy plans. The 2023 Incentive Plan is currently the only plan pursuant to which future stock-based awards may be granted.
The number of shares of the Company’s common stock initially authorized for grant under the 2023 Incentive Plan was 5,789,184 shares. In May 2025, the Company’s shareholders authorized an additional 2.1 million shares of the Company’s common stock for grant under the 2023 Incentive Plan. The following are not counted towards the combined 7,889,184 shares available and will be available for future grants under the 2023 Incentive Plan: (i) shares of common stock subject to awards that expire unexercised, that are forfeited, terminated or canceled, that are settled in cash or other forms of property, or otherwise do not result in the issuance of shares of common stock, in whole or in part; (ii) shares that are used to pay the exercise price of stock options and shares used to pay withholding taxes on awards generally; and (iii) shares purchased by the Company on the open market using cash option exercise proceeds; provided, however, that the increase in the number of shares of common stock available for grant pursuant to such market purchases shall not be greater than the number that could be repurchased at fair market value on the date of exercise of the stock option giving rise to such option proceeds. In addition, the 7,889,184 shares authorized by shareholders for issuance under the 2023 Incentive Plan will be increased by any shares subject to awards under the 2014 Incentive Plan that were outstanding as of May 24, 2023 and subsequently expire, are forfeited, canceled, settled in cash or otherwise terminate without the issuance of shares.
The Company also has a compensation program for non-employee directors (the Director Compensation Program). Under the Director Compensation Program, non-employee directors’ compensation consists of an annual retainer, a deferred stock award, committee chair fees and a lead director fee. Each non-employee director may choose to receive all or a portion of his or her annual retainer, committee chair fee and lead director fee, as applicable, in the form of cash or deferred stock units which vest upon grant. The annual deferred stock awards vest in full one day prior to the date of the Company’s annual meeting of shareholders occurring in the year following the year of the grant date, subject to continued service. The annual deferred stock awards, including dividend equivalents, accumulate until distribution either in a lump sum or, if the director so elects, in annual installments, in each case beginning at least six months following termination of service as a director. The deferred stock units issued under the Director Compensation Program are awarded under the 2023 Incentive Plan.
Stock Option Awards
Stock option awards granted to eligible officers and key employees have a ten-year term. All stock options are granted with an exercise price equal to the closing price of the Company’s common stock on the date of grant. The stock options granted generally vest upon meeting certain years of service criteria. Except as the Compensation Committee of the Board of Directors may allow in the future, stock options cannot be sold or transferred by the participant. Stock options outstanding under the 2023 Incentive Plan and the 2014 Incentive Plan generally vest three years after grant date (cliff vest).
The fair value of each option award is estimated on the date of grant by application of a variation of the Black-Scholes option pricing model using the assumptions noted in the following table. The expected term of newly granted stock options is based on historical exercise behavior and forfeitures by employees adjusted for certain other factors expected to differ from historical trends, if any. The expected volatility assumption is based on the historical volatility of the Company’s common stock for the same period as the estimated option term generally using the volatility of the week prior to the stock option grant. The expected dividend is based upon the Company’s current quarter dividend annualized and assumed to be constant over the expected option term. The risk-free interest rate for each option is the interpolated U.S. Treasury rates with a term comparable to the expected option term for the same week used for measuring volatility. The following table provides information about options granted:
| (for the year ended December 31,) | 2025 | 2024 | 2023 | |||||||||||||||||
| Assumptions used in estimating fair value of options on grant date | ||||||||||||||||||||
| Expected term of stock options | 6 years | 6 years | 6 years | |||||||||||||||||
| Expected volatility of Company’s stock | 26.22 | % | 25.80 | % | 25.63% - 25.99% | |||||||||||||||
| Weighted average volatility | 26.22 | % | 25.80 | % | 25.63 | % | ||||||||||||||
| Expected annual dividend per share | $4.20 | $4.00 | $3.72 | |||||||||||||||||
| Risk-free rate | 4.39 | % | 3.99 | % | 3.63% - 3.89% | |||||||||||||||
| Additional information | ||||||||||||||||||||
Weighted average grant-date fair value of options granted (per share) | $ | 68.92 | $ | 56.45 | $ | 47.77 | ||||||||||||||
Total intrinsic value of options exercised during the year (in millions) | $ | 186 | $ | 205 | $ | 58 | ||||||||||||||
A summary of stock option activity under the 2023 Incentive Plan and the legacy plans as of and for the year ended December 31, 2025 is as follows:
| Stock Option Activity | Number | Weighted Average Exercise Price | Weighted Average Contractual Life Remaining | Aggregate Intrinsic Value ($ in millions) | ||||||||||||||||||||||
| Outstanding, beginning of year | 7,005,747 | $ | 153.89 | |||||||||||||||||||||||
| Original grants | 648,808 | 244.06 | ||||||||||||||||||||||||
| Exercised | (1,405,737) | 136.09 | ||||||||||||||||||||||||
| Forfeited or expired | (54,162) | 212.45 | ||||||||||||||||||||||||
| Outstanding, end of year | 6,194,656 | $ | 166.86 | 5.5 years | $ | 763 | ||||||||||||||||||||
Vested at end of year (1) | 5,557,170 | $ | 161.26 | 5.2 years | $ | 716 | ||||||||||||||||||||
| Exercisable at end of year | 4,142,265 | $ | 143.68 | 4.3 years | $ | 606 | ||||||||||||||||||||
(1)Represents awards for which the requisite service has been rendered, including those that are retirement eligible.
Subsequent to the balance sheet date, on February 3, 2026, the Company granted 572,936 stock option awards under the 2023 Incentive Plan with an exercise price of $288.23 per share. The fair value attributable to the stock option awards on the date of grant was $81.68 per share.
Restricted Stock Units, Deferred Stock Units and Performance Share Award Programs
The Company issues restricted stock unit awards to eligible officers and key employees under the Equity Awards program pursuant to the 2023 Incentive Plan. A restricted stock unit represents the right to receive a share of common stock. These restricted stock unit awards are granted at market price, generally vest three years from the date of grant, do not have voting rights and the underlying shares of common stock are not issued until the vesting criteria is satisfied. In addition, members of the Company’s Board of Directors can be issued deferred stock units from (i) an annual award; (ii) deferred compensation (in lieu of cash retainer, committee chair fees and lead director fees); and (iii) dividend equivalents earned on outstanding deferred compensation. The fair value of restricted stock units and deferred stock units was measured at the market price of the Company’s common stock at date of grant.
The Company also has a Performance Share Awards program pursuant to the 2023 Incentive Plan. Under the program, the Company may issue performance share awards to certain employees of the Company who hold positions of Vice President (or its equivalent) or above. The performance share awards provide the recipient the right to earn shares of the Company’s common stock based upon the Company’s attainment of certain performance goals and the recipient meeting certain years of service criteria. The performance goals for outstanding performance share awards are based on the Company’s adjusted return on
equity over a three-year performance period and for the 2025 grant year include the attainment of certain market-based goals over the performance period.
Performance shares granted in 2023 and 2024 may vest in shares of the Company’s stock contingent upon the Company attaining the relevant performance period return on equity (ROE) minimum threshold and the recipient meeting certain years of service criteria, generally three years for full vesting. If the performance period return on equity is below the minimum threshold, none of the performance shares will vest. If performance meets or exceeds the minimum performance threshold, a range of performance shares will vest (50% to 200% for awards granted), depending on the actual return on equity attained. The value of these performance shares was measured at the market price of the Company’s common stock at the date of grant.
Beginning with the 2025 performance share award, the award incorporates a modifier to the performance share payout based on relative total shareholder return. This modifier adjusts final payouts higher or lower by a maximum of 20% percentage points based on the Company’s total shareholder return relative to the total shareholder return for companies included in the S&P 500 Financials Index (Peer Companies), in each case over the applicable performance period. The range of performance shares that may vest under the plan is 0% to an overall maximum payout of 200%. The grant date fair value of the 2025 award, which includes this market-based modifier, was determined using the risk neutral Monte Carlo simulation model and using the assumptions noted in the following table. The expected term of newly granted performance shares is based on the remaining performance period as of the valuation date. The expected volatility assumption for the Company and the Peer Companies is based on each entity’s historical stock price volatility over the last 2.9 years on the date of valuation. The expected dividend yield assumes dividends distributed during the period are reinvested. The risk-free interest rate for each performance share is the interpolated U.S. Treasury rates commensurate with the expected term of the performance share on the date of grant. The following table provides a summary of the assumptions used in estimating the fair value of the 2025 performance awards on grant date:
| Assumptions used in estimating fair value of performance awards on grant date | 2025 | |||||||
| Expected term | 2.9 years | |||||||
| Expected volatility | 28.16 | % | ||||||
| Expected dividend yield | 0.00 | % | ||||||
| Risk-free interest rate | 4.20 | % | ||||||
Under the terms of the 2023 Incentive Plan, holders of deferred stock units and performance shares may receive dividend equivalents.
The total fair value of shares that vested during the years ended December 31, 2025, 2024 and 2023 was $267 million, $253 million and $164 million, respectively.
A summary of restricted stock units, deferred stock units and performance share activity under the 2023 Incentive Plan and the legacy plans as of and for the year ended December 31, 2025 is as follows:
| Restricted and Deferred Stock Units | Performance Shares | |||||||||||||||||||||||||
| Restricted Stock and Performance Share Activity | Number | Weighted Average Grant-Date Fair Value | Number | Weighted Average Grant-Date Fair Value | ||||||||||||||||||||||
| Nonvested, beginning of year | 1,100,989 | $ | 192.83 | 1,155,648 | $ | 200.66 | ||||||||||||||||||||
| Granted | 493,676 | 247.31 | 252,956 | (1) | 251.19 | |||||||||||||||||||||
| Vested | (451,967) | (2) | 196.26 | (582,010) | (3) | 189.02 | ||||||||||||||||||||
| Forfeited | (81,137) | 210.93 | (18,078) | 216.75 | ||||||||||||||||||||||
| Performance-based adjustment | — | — | 234,724 | (4) | 229.56 | |||||||||||||||||||||
| Nonvested, end of year | 1,061,561 | $ | 215.33 | 1,043,240 | $ | 225.63 | ||||||||||||||||||||
(1)Represents the number of performance shares at target ROE at date of grant. The weighted average grant date fair value assumes attaining 100% of the performance shares granted.
(2)Represents the number of awards for which the requisite service has been rendered.
(3)Represents the number of performance shares attributable to the performance goals attained over the completed performance period (three years) and for which service conditions have been met.
(4)Represents the current year change in estimated performance shares to reflect the attainment of performance goals for the awards that were granted in each of the years 2023 through 2025. Because the 2025 award is subject to both a performance and market-based condition modifier, the estimated fair value of the award is updated from the grant date fair value to reflect the estimation of the impact of the award’s market-based modifier.
In addition to the nonvested shares presented in the above table, there are related nonvested dividend equivalent shares. The number of nonvested dividend equivalent shares related to deferred stock units was 165 at the beginning of the year and 114 at the end of the year and the number of nonvested dividend equivalent shares related to performance shares was 35,112 at the beginning of the year and 26,815 at the end of the year. The dividend equivalent shares are subject to the same vesting terms as the deferred stock units and performance shares.
Share-Based Compensation Cost Recognition
The amount of compensation cost for awards subject to a service condition is based on the number of shares expected to be issued and is recognized over the time period for which service is to be provided (requisite service period), generally the vesting period. Awards granted to retiree-eligible employees or to employees who become retiree-eligible before an award’s vesting date are considered to have met the requisite service condition if the vesting terms are accelerated upon retirement. The compensation cost for awards subject to a performance condition and, if applicable, a market-based modifier, is based upon the probable outcome of the performance condition, which on the grant date reflects an estimate of attaining 100% of the performance shares granted. The compensation cost reflects an estimated annual forfeiture rate from 1.5% to 3.5% over the requisite service period of the awards. That estimate is revised if subsequent information indicates that the actual number of instruments expected to vest is likely to differ from previous estimates. Compensation costs for awards are recognized on a straight-line basis over the requisite service period. For awards that have graded vesting terms, the compensation cost is recognized on a straight-line basis over the requisite service period for each separate vesting portion of the award as if the award was, in substance, multiple awards. The total compensation cost for all share-based incentive compensation awards recognized in earnings for the years ended December 31, 2025, 2024 and 2023 was $256 million, $260 million and $214 million, respectively. Included in these amounts are compensation cost adjustments of $55 million, $68 million and $39 million, for the years ended December 31, 2025, 2024 and 2023, respectively, that reflected the cost associated with the updated estimate of performance shares due to attaining certain performance levels from the date of the initial grant of the performance awards. The related tax benefits recognized in earnings were $43 million, $43 million and $36 million for the years ended December 31, 2025, 2024 and 2023, respectively.
As of December 31, 2025, there was $255 million of total unrecognized compensation cost related to all nonvested share-based incentive compensation awards. This includes stock options, restricted and deferred stock units and performance shares granted under the 2023 Incentive Plan. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 1.7 years. Cash received from the exercise of employee stock options under share-based compensation plans totaled $214 million, $321 million and $141 million in 2025, 2024 and 2023, respectively. The tax benefit for tax deductions from employee stock options exercised during 2025, 2024 and 2023 totaled $31 million, $39 million and $11 million, respectively.
Awards Made Subsequent to the Balance Sheet Date
On February 3, 2026, the Company granted 607,689 common stock awards in the form of restricted stock units, deferred stock units and performance share awards under the 2023 Incentive Plan to participating officers, non-employee directors and other key employees.
Included in the total common stock awards granted were 382,510 shares of restricted stock units and deferred stock units with a fair value per share attributable to the units of $288.23 and 225,179 performance shares having a fair value at grant date of $300.82.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 11, 2021 | |
| 2019 | Feb 13, 2020 | |
| 2018 | Feb 14, 2019 | |
| 2017 | Feb 15, 2018 | |
| 2016 | Feb 16, 2017 | |
| 2015 | Feb 11, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.