<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                           --------------------------

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                       OR

            [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                 FOR THE TRANSITION PERIOD FROM______ TO ______

                           --------------------------

                         COMMISSION FILE NUMBER 33-03094

                           --------------------------

                         THE TRAVELERS INSURANCE COMPANY
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          CONNECTICUT                                            06-0566090
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

                 ONE CITYPLACE, HARTFORD, CONNECTICUT 06103-3415
               (Address of principal executive offices) (Zip Code)

                                 (860) 308-1000
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                        Yes [X]                 No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
                        Yes [X]                 No [ ]

Indicate by checkmark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

                        Yes [ ]                 No [X]

As of the date hereof, there were outstanding 40,000,000 shares of common stock,
par value $2.50 per share, of the registrant, all of which were owned by
Citigroup Insurance Holding Corporation, an indirect wholly owned subsidiary of
Citigroup Inc.

                            REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction I(1)(a) and
(b) of Form 10-K and is therefore filing this Form with the reduced disclosure
format.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
FORM 10-K
ITEM NUMBER                                                                                                            PAGE
-----------                                                                                                            ----
<S>      <C>                                                                                                           <C>
                                                          PART I
1.       Business...................................................................................................     2

         A.  General................................................................................................     2
         B.  Business by Segment
                 Travelers Life & Annuity...........................................................................     2
                 Primerica Life Insurance...........................................................................     4
         C. Insurance Regulations...................................................................................     4

2.       Properties.................................................................................................     6

3.       Legal Proceedings..........................................................................................     6

4.       Submission of Matters to a Vote of Security Holders........................................................     6

                                                          PART II

5.       Market for Registrant's Common Equity and Related Stockholder Matters......................................     6

6.       Selected Financial Data....................................................................................     6

7.       Management's Discussion and Analysis of Financial Condition and Results of Operations......................     7

7A.      Quantitative and Qualitative Disclosures About Market Risk.................................................    15

8.       Financial Statements and Supplementary Data................................................................    18

9.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................    61

                                                          PART III

10.      Directors and Executive Officers of the Registrant.........................................................    61

11.      Executive Compensation.....................................................................................    61

12.      Security Ownership of Certain Beneficial Owners and Management.............................................    61

13.      Certain Relationships and Related Transactions.............................................................    61

14.      Controls and Procedures....................................................................................    61

                                                          PART IV

15.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K...........................................    62
         Exhibit Index..............................................................................................    63
         Signatures and Certifications..............................................................................    64
         Index to Financial Statements and Financial Statement Schedules............................................    67
         Exhibit 10.04..............................................................................................    72
         Exhibit 10.05..............................................................................................    78
         Exhibit 14.01..............................................................................................    82
         Exhibit 99.01..............................................................................................    84
</TABLE>

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

                                     PART I

     ITEM 1. BUSINESS.

     GENERAL

     The Travelers Insurance Company (TIC, together with its subsidiaries, the
     Company), is a wholly owned subsidiary of Citigroup Insurance Holding
     Corporation (CIHC), an indirect wholly owned subsidiary of Citigroup Inc.
     (Citigroup). Citigroup is a diversified global financial services holding
     company whose businesses provide a broad range of financial services to
     consumer and corporate customers around the world. The periodic reports of
     Citigroup provide additional business and financial information concerning
     it and its consolidated subsidiaries. TIC was incorporated in 1863. With
     $83.0 billion of assets and $549.1 billion of life insurance in force at
     December 31, 2002, the Company believes that it is one of the largest stock
     life insurance groups in the United States as measured by these criteria.

     At December 31, 2001, the Company was a wholly owned subsidiary of The
     Travelers Insurance Group, Inc. (TIGI). On February 4, 2002, TIGI changed
     its name to Travelers Property Casualty Corp. (TPC). TPC completed its
     initial public offering (IPO) on March 27, 2002 and on August 20, 2002
     Citigroup made a tax-free distribution of the majority of its remaining
     interest in TPC, to Citigroup's stockholders. Prior to the IPO, the common
     stock of TIC was distributed by TPC to CIHC so that TIC would remain an
     indirect wholly owned subsidiary of Citigroup. See Note 15 of Notes to
     Consolidated Financial Statements.

     The Company's two reportable business segments are Travelers Life & Annuity
     and Primerica Life Insurance. The primary insurance entities of the Company
     are TIC and its subsidiary The Travelers Life and Annuity Company (TLAC),
     included in the Travelers Life & Annuity segment, and Primerica Life
     Insurance Company (Primerica Life) and its subsidiaries, Primerica Life
     Insurance Company of Canada, CitiLife Financial Limited (CitiLife) and
     National Benefit Life Insurance Company (NBL), included in the Primerica
     Life Insurance segment. The consolidated financial statements include the
     accounts of the insurance entities of the Company and Tribeca Citigroup
     Investments Ltd. on a fully consolidated basis.

     Additional information about the Company is available on the Citigroup
     website at http://www.citigroup.com by selecting the "Investor Relations"
     page and selecting "SEC Filings."

     BUSINESS BY SEGMENT

     TRAVELERS LIFE & ANNUITY

     Travelers Life & Annuity (TLA) core offerings include individual annuity,
     individual life, corporate owned life insurance (COLI) and group annuity
     insurance products distributed by TIC and TLAC principally under the
     Travelers Life & Annuity name. Among the range of individual products
     offered are fixed and variable deferred annuities, payout annuities and
     term, universal and variable life insurance. The COLI product is a variable
     universal life product distributed through independent specialty brokers.
     The group products include institutional pensions, including guaranteed
     investment contracts, payout annuities, group annuities sold to
     employer-sponsored retirement and savings plans and structured finance
     funding agreements. The majority of the annuity business and a substantial
     portion of the life business written by TLA are accounted for as investment
     contracts, with the result that the deposits collected are reported as
     liabilities and are not included in revenues.

                                       2

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     Individual fixed and variable annuities are primarily used for retirement
     funding purposes. Variable annuities permit policyholders to direct
     retirement funds into a number of separate accounts, which offer differing
     investment options. Individual payout annuities offer a guaranteed payment
     stream over a specified or life contingent period.

     Individual life insurance is used to meet estate, business planning and
     retirement needs and also to provide protection against financial loss due
     to death.

     Group annuity products, including fixed and variable rate guaranteed
     investment contracts, which provide a guaranteed return on investment,
     continue to be a popular investment choice for employer-sponsored
     retirement and savings plans. Annuities purchased by employer-sponsored
     plans fulfill retirement obligations to individual employees. Payout
     annuities are used for providing structured settlements of certain
     indemnity claims and making other payments to policyholders over a period
     of time. Structured finance transactions offer fixed term and rate
     investment options with policyholder status to domestic and foreign
     institutional investors. These group annuity products are sold through
     direct sales and various intermediaries.

     TIC is licensed to sell and market its individual products in all 50
     states, the District of Columbia, Puerto Rico, Guam, the Bahamas and the
     U.S. and British Virgin Islands.

     Individual annuity products are distributed through affiliated channels and
     non-affiliated channels. The affiliated channels include CitiStreet
     Retirement Services LLC (CitiStreet), a joint venture between Citigroup and
     State Street Bank; Salomon Smith Barney (SSB); Primerica Financial Services
     (PFS); and Citibank. The non-affiliated channels primarily include a
     nationwide network of independent financial professionals and independent
     broker-dealers. CitiStreet is a sales organization of personal retirement
     planning specialists focused primarily on the qualified periodic deferred
     annuity marketplace. CitiStreet's share of total individual annuity
     premiums and deposits was 29% in 2002. SSB distributes TLA's individual
     annuities and individual life products, and accounted for 19% of total
     individual annuity premiums and deposits in 2002. Sales by PFS and Citibank
     accounted for 15% and 7% respectively, of total individual annuity premiums
     and deposits in 2002. The non-affiliated channels accounted for 30% of
     individual annuity premiums and deposits.

     Individual life products are primarily marketed by the independent
     financial professionals and by SSB, who accounted for 80% and 16%,
     respectively, of total individual life sales for 2002.

     Effective July 1, 2000, the Company sold 90% of its individual long-term
     care insurance business to General Electric Capital Assurance Company in
     the form of an indemnity reinsurance arrangement. See Note 2 of Notes to
     Consolidated Financial Statements.

     The Company operates Tower Square Securities, Inc. (Tower Square
     Securities), which is an introducing broker-dealer offering a full line of
     brokerage services. Tower Square Securities facilitates the sale of
     individual variable life and annuity insurance products by the independent
     financial professionals. Travelers Distribution LLC is the principal
     underwriter and distributor for Travelers Life & Annuity variable products.

                                       3

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     PRIMERICA LIFE INSURANCE

     Primerica Life and its subsidiaries, Primerica Life Insurance Company of
     Canada, CitiLife and NBL, are the insurance operations of PFS. Their
     primary product is individual term life insurance marketed through a sales
     force composed of approximately 107,000 representatives. A great majority
     of the domestic licensed sales force works on a part-time basis. NBL also
     provides statutory disability benefit insurance and other insurance,
     primarily in New York, as well as direct response student term life
     insurance nationwide. CitiLife was established in September 2000 to
     underwrite insurance in Europe. Primerica Life, directly or through its
     subsidiaries, is licensed or otherwise authorized to sell and market term
     life insurance in all 50 states, the District of Columbia, Puerto Rico,
     Guam, the U.S. Virgin Islands, Northern Mariana Islands, Canada and Spain.

     INSURANCE REGULATIONS

     Insurance Regulatory Information System

     The National Association of Insurance Commissioners (NAIC) Insurance
     Regulatory Information System ("IRIS") was developed to help state
     regulators identify companies that may require special attention. The IRIS
     system consists of a statistical phase and an analytical phase whereby
     financial examiners review annual statements and financial ratios. The
     statistical phase consists of 12 key financial ratios based on year-end
     data that are generated from the NAIC database annually; each ratio has an
     established "usual range" of results. These ratios assist state insurance
     departments in executing their statutory mandate to oversee the financial
     condition of insurance companies.

     A ratio result falling outside the usual range of IRIS ratios is not
     considered a failing result; rather, unusual values are viewed as part of
     the regulatory early monitoring system. Furthermore, in some years, it may
     not be unusual for financially sound companies to have several ratios with
     results outside the usual ranges. An insurance company may fall out of the
     usual range for one or more ratios because of specific transactions that
     are in themselves immaterial. Generally, an insurance company will become
     subject to regulatory scrutiny if it falls outside the usual ranges for
     four or more of the ratios. Prior to codification of statutory accounting
     principles effective in 2001, 15% of the companies included in the IRIS
     system were expected by the NAIC, in normal years, to be outside the usual
     range on four or more ratios.

     In 2001, four IRIS ratios for TLAC had fallen outside of the usual range
     due to growth in business volume. For 2001, the regulators have been
     satisfied upon follow-up that there was no solvency problem. In 2002, TLAC
     had three IRIS ratios fall outside of the usual range. No regulatory action
     has been taken by any state insurance department or the NAIC with respect
     to IRIS ratios of the primary domestic insurance entities of the Company or
     any of its insurance subsidiaries during the two years ended December 31,
     2002.

     Risk-Based Capital (RBC) Requirements

     In order to enhance the regulation of insurer solvency, the NAIC adopted a
     formula and model law to implement RBC requirements for most life and
     annuity insurance companies, which are designed to determine minimum
     capital requirements and to raise the level of protection that statutory
     surplus provides for policyholder obligations. For this purpose, an
     insurer's total adjusted capital is measured in relation to its specific
     asset and liability profiles. A company's risk-based capital is calculated
     by applying factors to various asset, premium and reserve items, where the
     factor is higher for those items with greater underlying risk and lower for
     less risky items.

                                       4

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     The RBC formula for life insurers measures four major areas of risk:

          -    asset risk (i.e., the risk of asset default),

          -    insurance risk (i.e., the risk of adverse mortality and morbidity
               experience),

          -    interest rate risk (i.e., the risk of loss due to changes in
               interest rates) and

          -    business risk (i.e., normal business and management risk).

     Under laws adopted by the states, insurers having less total adjusted
     capital than that required by the RBC calculation will be subject to
     varying degrees of regulatory action, depending upon the level of capital
     inadequacy.

     The RBC law provides for four levels of regulatory action as defined by the
     NAIC. The extent of regulatory intervention and action increases as the
     level of total adjusted capital to RBC falls. The first level, the company
     action level, requires an insurer to submit a plan of corrective actions to
     the regulator if total adjusted capital falls below 200% of the RBC amount.
     The second level, the regulatory action level, requires an insurer to
     submit a plan containing corrective actions and requires the relevant
     insurance commissioner to perform an examination or other analysis and
     issue a corrective order if total adjusted capital falls below 150% of the
     RBC amount. The third level, the authorized control level, authorizes the
     relevant commissioner to take whatever regulatory actions are considered
     necessary to protect the best interest of the policyholders and creditors
     of the insurer which may include the actions necessary to cause the insurer
     to be placed under regulatory control, i.e., rehabilitation or liquidation,
     if total adjusted capital falls below 100% of the RBC amount. The fourth
     level, the mandatory control level, requires the relevant insurance
     commissioner to place the insurer under regulatory control if total
     adjusted capital falls below 70% of the RBC amount.

     The formulas have not been designed to differentiate among adequately
     capitalized companies, which operate with higher levels of capital.
     Therefore, it is inappropriate and ineffective to use the formula to rate
     or rank companies. At December 31, 2002, the Company's principal domestic
     insurance entities all had total adjusted capital in excess of amounts
     requiring company action or any level of regulatory action at any
     prescribed RBC level.

     Insurance Regulation Concerning Dividends

     TIC is domiciled in the State of Connecticut. The insurance holding company
     law of Connecticut requires notice to, and approval by, the State of
     Connecticut Insurance Department for the declaration or payment of any
     dividend which, together with other distributions made within the preceding
     twelve months, exceeds the greater of (i) 10% of the insurer's surplus or
     (ii) the insurer's net gain from operations for the twelve-month period
     ending on the preceding December 31st, in each case determined in
     accordance with statutory accounting practices. Such declaration or payment
     is further limited by adjusted unassigned funds (surplus), as determined in
     accordance with statutory accounting practices. The insurance holding
     company laws of other states in which the Company's insurance subsidiaries
     are domiciled generally contain similar (although in certain instances
     somewhat more restrictive) limitations on the payment of dividends. A
     maximum of $966 million is available by the end of the year 2003 for such
     dividends without prior approval of the State of Connecticut Insurance
     Department, depending upon the amount and timing of the payments. TLAC may
     not pay a dividend to TIC without such approval. Primerica Life may pay up
     to $148 million to TIC in 2003 without prior approval of the Massachusetts
     Insurance Department.


                                       5

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     Code of Ethics

     The Company has adopted a code of ethics for financial professionals which
     applies to the Company's principal executive officer and principal
     financial and accounting officer. The code of ethics for financial
     professionals has been included as an exhibit to this Form 10-K.

     ITEM 2. PROPERTIES.

     The Company's executive offices are located in Hartford, Connecticut. At
     December 31, 2002 the Company leased approximately 284,000 square feet from
     TPC at One Tower Square, Hartford, Connecticut under a lease that runs
     through March 31, 2003. The Company previously owned this building complex,
     and sold it as well as a building in Norcross, Georgia housing TPC's
     information systems department, to TPC for $68 million as part of the TPC
     spin-off from Citigroup on February 28, 2002. See Note 15 of Notes to
     Consolidated Financial Statements.

     The Company is moving its executive offices to One Cityplace, Hartford,
     Connecticut, during the first quarter of 2003. The Company will occupy
     373,000 square feet at this location under an operating lease that runs
     through October 31, 2008.

     Other leasehold interests of the Company include approximately 620,000
     square feet of office space in 14 locations throughout the United States.

     Management believes that these facilities are suitable and adequate for the
     Company's current needs. See Note 11 of Notes to Consolidated Financial
     Statements for additional information regarding these facilities.

     The foregoing discussion does not include information on investment
     properties.

     ITEM 3. LEGAL PROCEEDINGS.

     In the ordinary course of business, TIC and its subsidiaries are defendants
     or co-defendants in various other litigation matters incidental to and
     typical of the businesses in which they are engaged. These include civil
     actions, arbitration proceedings and other matters arising in the normal
     course of business out of activities as an insurance company, a broker and
     dealer in securities or otherwise. In the opinion of the Company's
     management, the ultimate resolution of these legal proceedings would not be
     likely to have a material adverse effect on the Company's results of
     operations, financial condition or liquidity. This statement is a
     forward-looking statement within the meaning of the Private Securities
     Litigation Reform Act. See "Forward-Looking Statements" on page 15.

     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     Omitted pursuant to General Instruction I(2)(c) of Form 10-K.

                                     PART II

     ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
             MATTERS.

     The Company has 40,000,000 authorized shares of common stock, all of which
     are issued and outstanding as of December 31, 2002. All shares are held by
     an indirect subsidiary of Citigroup, and there exists no established public
     trading market for the common equity of the Company. The Company paid
     dividends to its parent of $586 million and $472 million in 2002 and 2001,
     respectively. See Note 9 of Notes to Consolidated Financial Statements for
     certain information regarding dividend restrictions.

                                       6

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K


     ITEM 6. SELECTED FINANCIAL DATA.

     Omitted pursuant to General Instruction I(2)(a) of Form 10-K.

     ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
             RESULTS OF OPERATIONS.

     Management's narrative analysis of the results of operations is presented
     in lieu of Management's Discussion and Analysis of Financial Condition and
     Results of Operations, pursuant to General Instruction I(2)(a) of Form
     10-K.

     The Travelers Insurance Company (TIC, together with its subsidiaries, the
     Company) is a direct subsidiary of Citigroup Insurance Holdings Corporation
     (CIHC), an indirect wholly owned subsidiary of Citigroup Inc. (Citigroup).
     At December 31, 2001, the Company was a wholly owned subsidiary of The
     Travelers Insurance Group, Inc. (TIGI). On February 4, 2002, TIGI changed
     its name to Travelers Property Casualty Corp. (TPC). TPC completed its
     initial public offering (IPO) on March 27, 2002 and on August 20, 2002
     Citigroup made a tax-free distribution of the majority of its remaining
     interest in TPC, to Citigroup's stockholders. Prior to the IPO, the common
     stock of TIC was distributed by TPC to CIHC so that TIC would remain an
     indirect wholly owned subsidiary of Citigroup. See Note 15 of Notes to
     Consolidated Financial Statements. The Company is composed of two business
     segments, Travelers Life & Annuity and Primerica Life Insurance.

     Travelers Life & Annuity (TLA) core offerings include individual annuity,
     individual life, corporate owned life insurance (COLI) and group annuity
     insurance products distributed by TIC and The Travelers Life and Annuity
     Company (TLAC) under the Travelers Life & Annuity name. Among the range of
     individual products offered are fixed and variable deferred annuities,
     payout annuities and term, universal and variable life insurance. These
     products are primarily distributed through CitiStreet Retirement Services
     (CitiStreet), Smith Barney Financial Consultants, Primerica Financial
     Services (PFS), Citibank, and a nationwide network of independent agents
     and the growing outside broker dealer channel. The COLI product is a
     variable universal life product distributed through independent specialty
     brokers. The group products include institutional pensions, including
     guaranteed investment contracts, payout annuities, group annuities sold to
     employer-sponsored retirement and savings plans and structured finance
     transactions.

     Primerica Life and its subsidiaries, Primerica Life Insurance Company of
     Canada, CitiLife and NBL, are the insurance operations of PFS. Their
     primary product is individual term life insurance marketed through a sales
     force composed of approximately 107,000 representatives. A great majority
     of the domestic licensed sales force works on a part-time basis. NBL also
     provides statutory disability benefit insurance and other insurance,
     primarily in New York, as well as direct response student term life
     insurance nationwide. CitiLife was established in September 2000 to
     underwrite insurance in Europe. Primerica Life, directly or through its
     subsidiaries is licensed or otherwise authorized to sell and market term
     life insurance in all 50 states, the District of Columbia, Puerto Rico,
     Guam, the U.S. Virgin Islands, Northern Mariana Islands, Canada and Spain.

     CRITICAL ACCOUNTING POLICIES

     The financial statements contain a summary of the Company's significant
     accounting policies, including a discussion of recently issued accounting
     pronouncements. Certain of these policies are considered to be critical to
     the portrayal of the Company's financial condition, since they require
     management to make difficult, complex or subjective judgments, some of
     which may relate to matters that are inherently uncertain.


                                       7

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     INVESTMENTS

     Fixed maturities include bonds, notes and redeemable preferred stocks.
     Fixed maturities, including instruments subject to securities lending
     agreements (see Note 4 of Notes to Consolidated Financial Statements), are
     classified as "available for sale" and are reported at fair value, with
     unrealized investment gains and losses, net of income taxes, credited or
     charged directly to shareholder's equity. Fair values of investments in
     fixed maturities are based on quoted market prices or dealer quotes. If
     quoted market prices are not available, discounted expected cash flows
     using market rates commensurate with the credit quality and maturity of the
     investment are used to record fair value. Changes in assumptions could
     affect the fair values of fixed maturities. Impairments are realized when
     investment losses in value are deemed other-than-temporary. The Company
     conducts regular reviews to assess whether other-than-temporary impairments
     exist. Changing economic conditions - global, regional, or related to
     specific issuers or industries - could adversely affect these values.

     DEFERRED ACQUISITION COSTS

     Costs of acquiring traditional life, universal life, COLI, deferred
     annuities and payout annuities are deferred. These deferred acquisition
     costs (DAC) include principally commissions and certain expenses related to
     policy issuance, underwriting and marketing, all of which vary with and are
     primarily related to the production of new business. The method for
     determining amortization of deferred acquisition costs varies by product
     type based upon three different accounting pronouncements: Statement of
     Financial Accounting Standards No. 60, "Accounting and Reporting by
     Insurance Enterprises" (FAS 60), Statement of Financial Accounting
     Standards No. 91, "Accounting for Nonrefundable Fees and Costs Associated
     with Originating or Acquiring Loans and Initial Direct Costs of Leases"
     (FAS 91) and Statement of Financial Accounting Standards No. 97,
     "Accounting and Reporting by Insurance Enterprises for Certain Long
     Duration Contracts and for Realized Gains and Losses from the Sale of
     Investments" (FAS 97).

     DAC for deferred annuities, both fixed and variable, and payout annuities
     are amortized employing a level effective yield methodology per FAS 91 as
     permitted by AICPA Practice Bulletin 8. An amortization rate is developed
     using the outstanding DAC balance and projected account balances and is
     applied to actual account balances to determine the amount of DAC
     amortization. The projected account balances are derived using a model that
     contains assumptions related to investment returns and persistency. The
     model rate is evaluated periodically, at least annually, and the actual
     rate is reset in the following quarter and applied prospectively. A new
     amortization pattern is developed so that the DAC balances will be
     amortized over the remaining estimated life of the business. DAC for these
     products is currently being amortized over 10-15 years.

     DAC for universal life and COLI are amortized in relation to estimated
     gross profits from surrender charges, investment, mortality, and expense
     margins per FAS 97. Actual profits can vary from management's estimates,
     resulting in increases or decreases in the rate of amortization. Re-
     estimates of gross profits result in retrospective adjustments to earnings
     by a cumulative charge or credit to income. DAC for these products is
     currently being amortized over 16-25 years.

     DAC relating to traditional life, including term insurance, and health
     insurance are amortized in relation to anticipated premiums per FAS 60.
     Assumptions as to the anticipated premiums are made at the date of policy
     issuance or acquisition and are consistently applied over the life of the
     policy. DAC for these products is currently being amortized over 5-20
     years.

     DAC is reviewed to determine if it is recoverable from future income,
     including investment income, and, if not recoverable, is charged to
     expense. All other acquisition expenses are charged to operations as
     incurred.

                                       8

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     FUTURE POLICY BENEFITS

     Future policy benefits represent liabilities for future insurance policy
     benefits. The annuity payout reserves are calculated using the mortality
     and interest assumptions used in the actual pricing of the benefit.
     Mortality assumptions are based on the Company's experience and are
     adjusted to reflect deviations such as substandard mortality in structured
     settlement benefits. The interest rates range from 2.0% to 9.0%, with a
     weighted average rate of 7.1% for these annuity products. Traditional life
     products include whole life and term insurance. Future policy benefits for
     traditional life products are estimated on the basis of actuarial
     assumptions as to mortality, persistency and interest, established at
     policy issue. Interest assumptions applicable to traditional life products
     range from 2.5% to 7.0%, with a weighted average of 3.6%. Assumptions
     established at policy issue as to mortality and persistency are based on
     the Company's experience, which, together with interest assumptions,
     include a margin for adverse deviation. Appropriate recognition has been
     given to experience rating and reinsurance.

     PREMIUMS

     Premiums are recognized as revenues when due. Premiums for contracts with a
     limited number of premium payments, due over a significantly shorter period
     than the period over which benefits are provided, are considered income
     when due. The portion of premium which is not required to provide for
     benefits and expenses is deferred and recognized in income in a constant
     relationship to insurance benefits in force.

     CONSOLIDATED OVERVIEW

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,                          2002        2001
--------------------------------                          ----        ----
<S>                                                      <C>         <C>
($ in millions)

Revenues                                                 $5,234      $5,702
                                                         ======      ======

Net income                                               $1,082      $1,272

Net realized (gains) losses                                 209         (81)

Change in accounting principles                               -           9

                                                         ------      ------
Operating income                                         $1,291      $1,200
                                                         ======      ======
</TABLE>

     Net income declined 15% to $1.1 billion in 2002 from $1.3 billion in 2001.
     This decrease is attributable to net realized investment losses in 2002 of
     $209 million after-tax, including after-tax impairments to the fixed
     maturities portfolio related to WorldCom Inc. of $126 million, as well
     other fixed maturities and equity investment impairments, versus net
     realized gains of $81 million after-tax in 2001. Offsetting these declines
     from realized investment losses was an 8% increase in operating income.
     Operating income was $1.29 billion in 2002 up from $1.20 billion in 2001.
     The operating earnings increase was driven by increases in both business
     segments. See detailed description of each business segment.

     Revenues were down 8%, driven by the $322 million pre-tax realized
     investment losses in 2002 versus $125 million pre-tax realized investment
     gains in the prior year. Revenues in 2002 also include $125 million of
     dividends from Citigroup Series YYY Preferred Stock, contributed from TPC.
     See Note 15 of Notes to Consolidated Financial Statements.

                                       9

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     TRAVELERS LIFE & ANNUITY

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,                          2002        2001
--------------------------------                          ----        ----
<S>                                                      <C>         <C>
($ in millions)

Revenues                                                 $3,653      $4,089
                                                         ======      ======

Net income                                               $  673      $  826

Net realized (gains) losses                                 211         (33)

Change in accounting principles                               -           8

                                                         ------      ------
Operating income                                         $  884      $  801
                                                         ======      ======
</TABLE>

     Net income of $673 million in 2002 declined 19% from $826 million in 2001
     primarily due to after-tax realized investment losses of $211 million in
     2002, including after-tax impairments to the fixed maturities portfolio
     related to WorldCom Inc. of $122 million, as well as other fixed
     maturities and equity investment impairments, versus $33 million after-tax
     realized investment gains in 2001. The 2002 decline was partially offset by
     an $83 million increase in operating income. Operating income included a
     pre-tax increase in net investment income of $116 million, driven by $125
     million of dividends from Citigroup Series YYY Preferred Stock not received
     in the prior year. This operating income increase from the Series YYY
     dividends was offset by decreased retained investment margins as a result
     of lower fixed income returns and a declining equity market, partially
     offset by continued strong volumes in the group annuity and individual life
     businesses.

     TLA investment income of $2,646 million, including Citigroup Preferred
     Stock, in 2002 was approximately level with 2001. The decreased investment
     margins from the overall rate deterioration in 2002 was offset by a larger
     invested asset base from higher business volumes. Fixed maturities suffered
     from the lower rate environment and credit issues. Equity investment
     returns were below the prior year, but were offset by growth in real estate
     income. Real estate is primarily comprised of mortgage loan investments and
     real estate joint ventures.

                                       10

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     The following table shows net written premiums and deposits by product line
     for each of the years ended December 31, 2002 and 2001. The majority of the
     annuity business and a substantial portion of the life business written by
     TLA are accounted for as investment contracts, such that the premiums are
     considered deposits and are not included in revenues.

<TABLE>
<CAPTION>
                                                               2002                             2001
                                              --------------------------------     --------------------------------
IN MILLIONS OF DOLLARS                        Premiums     Deposits     Total      Premiums     Deposits     Total
                                              --------     --------    -------     --------     --------    -------
<S>                                           <C>          <C>         <C>         <C>          <C>         <C>
Individual annuities
  Fixed                                       $      -     $  2,182    $ 2,182     $      -     $  2,096    $ 2,096
  Variable                                           -        3,111      3,111            -        3,982      3,982
  Individual payout                                 28           30         58           22           37         59
                                              --------     --------    -------     --------     --------    -------
Total individual annuities                          28        5,323      5,351           22        6,115      6,137
GICS and other annuities                           545        5,747      6,292          768        6,300      7,068
Individual life insurance:
  Direct periodic premiums & deposits              135          636        771          137          515        652
  Single premium deposits                            -          285        285            -          208        208
  Reinsurance                                      (28)         (85)      (113)         (25)         (71)       (96)
                                              --------     --------    -------     --------     --------    -------
Total individual life insurance                    107          836        943          112          652        764
Other                                               50            -         50           55            -         55
                                              --------     --------    -------     --------     --------    -------
                            Total             $    730     $ 11,906    $12,636     $    957     $ 13,067    $14,024
                                              ========     ========    =======     ========     ========    =======
</TABLE>

     Individual annuity net written premiums and deposits decreased 13% in 2002
     to $5.351 billion from $6.137 billion in 2001. The decrease was driven by a
     decline in variable annuity sales due to current market conditions, but
     were partially offset by strong fixed annuity sales increases over the
     prior-year period. In 2002, non-affiliated sales channel business grew to
     30% of total individual annuity sales in 2002 from 26% in 2001 as TLA
     continued to increase its presence in the broker-dealer marketplace.
     Individual annuity account balances and benefits reserves were $27.5
     billion at December 31, 2002, down from $28.9 billion at December 31, 2001.
     These decreases reflect declines in market values of variable annuity
     investments of $3.6 billion in 2002 and $2.4 billion in 2001, partially
     offset by good in-force retention.

     Group Annuity net written premiums and deposits (excluding the Company's
     employee pension plan deposits) in 2002 were $6.292 billion, versus $7.068
     billion in 2001. The decline of $776 million in 2002 from 2001 reflects
     lower fixed guaranteed investment contracts (GIC) and large case employer
     pension sales. The decline in fixed GIC net written premiums and deposits
     reflects lower European Medium-Term Note sales due to market conditions.
     Group annuity account balances and benefit reserves reached $22.3 billion
     at December 31, 2002, an increase of $1.3 billion or 6% from $21.0 billion
     at December 31, 2001, primarily reflecting continued strong retention in
     all products and continued sales momentum in structured settlement
     products.

     Net written premiums and deposits for the life insurance business were $943
     million in 2002, up 23% from $764 million in 2001. This increase was
     related to direct periodic premiums and deposits for individual life
     insurance in 2002, which were up 18% to $771 million from $652 million in
     2001, driven by independent agent high-end estate planning and COLI sales.
     Life insurance in force was $82.3 billion at December 31, 2002, up from
     $75.7 billion at December 31, 2001.

     During 2002, TLA expenses increased primarily due to volume related
     insurance expenses, including premium taxes and renewal commissions and
     expenses related to the transfer of employee benefit liabilities from the
     spin-off of Travelers Property Casualty, which were offset in revenue
     related to the assets transferred. During the first quarter of 2002, TLA
     had a one-time decrease in DAC amortization of $22 million related to
     changes in the underlying lapse and interest rate assumptions in the
     individual annuity business. This decrease was mostly offset in the fourth
     quarter of 2002, by an increase in amortization expense due to a higher
     amortization rate resulting from the decrease in market value of individual
     annuity account balances.

                                       11

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     The amortization of capitalized DAC is a significant component of TLA
     expenses. TLA's recording of DAC varies based upon product type. DAC for
     deferred annuities, both fixed and variable, and payout annuities employs a
     level yield methodology as per FAS 91. DAC for universal life (UL) and COLI
     are amortized in relation to estimated gross profits as per FAS 97, with
     traditional life, including term insurance and other products amortized in
     relation to anticipated premiums as per FAS 60. The following is a summary
     of capitalized DAC by type:

<TABLE>
<CAPTION>
                                               Deferred & Payout                     Traditional
In millions of dollars                             Annuities          UL & COLI      Life & Other             Total
----------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                    <C>            <C>                     <C>
Balance December 31, 2000                          $   896            $     299        $      96             $ 1,291
                                               -----------------------------------------------------------------------

Commissions and expenses deferred                      385                  142               26                 553
Amortization expense                                  (144)                 (11)             (16)               (171)

                                               -----------------------------------------------------------------------
Balance December 31, 2001                            1,137                  430              106               1,673

Commissions and expenses deferred and other            347                  172               26                 545
Amortization expense                                  (131)                 (24)             (19)               (174)

                                               -----------------------------------------------------------------------
Balance December 31, 2002                          $ 1,353            $     578        $     113             $ 2,044
----------------------------------------------------------------------------------------------------------------------
</TABLE>

     OUTLOOK

     TLA should benefit from growth in the aging population which is becoming
     more focused on the need to accumulate adequate savings for retirement, to
     protect these savings and to plan for the transfer of wealth to the next
     generation. TLA is well positioned to take advantage of the favorable
     long-term demographic trends through its strong financial position,
     widespread brand name recognition and broad array of competitive life,
     annuity and retirement, and estate planning products sold through
     established distribution channels.

     However, competition in both product pricing and customer service is
     intensifying. While there has been some consolidation within the industry,
     other financial services organizations are increasingly involved in the
     sale and/or distribution of insurance products. Also, the annuities
     business is interest rate and market sensitive.

     TLA's business is significantly affected by movements in the U.S. equity
     and fixed income credit markets. U.S. equity and credit market events can
     have both positive and negative effects on the deposit, revenue and policy
     retention performance of the business. A sustained weakness in the equity
     markets will decrease revenues and earnings in variable products. Declines
     in credit quality of issuers will have a negative effect on earnings.

     In order to strengthen its competitive position, TLA expects to maintain a
     current product portfolio, further diversify its distribution channels, and
     retain its financial position through strong sales growth and maintenance
     of an efficient cost structure.

     President Bush's recent budget proposal (the Budget Proposal) contains a
     number of provisions that could impact the Company, including provisions to
     eliminate the double taxation of corporate dividends and to create new
     types of savings accounts with tax-free earnings. The Budget Proposal is in
     its early stages of consideration.

                                       12

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     It is not possible to predict whether the Budget Proposal will be enacted,
     what form such legislation might take when enacted, or the potential
     effects of such legislation on the Company and its competitors. The Company
     does not expect the Budget Proposal to have a material impact on its
     financial condition or liquidity.

     In July 2002, the Accounting Standards Executive Committee (AcSEC) issued a
     Proposed Statement of Position (PSOP) on Accounting and Reporting by
     Insurance Enterprises for Certain Nontraditional Long-Duration Contracts
     and for Separate Accounts. This PSOP includes accounting and disclosure for
     separate account assets, liabilities, gains and losses transferred from the
     separate account, as well as accounting and reserving for nontraditional
     contracts that contain death and other insurance features. The contracts
     containing death and other insurance features are generally referred to as
     Guaranteed Minimum Death Benefits (GMDB). The Company reports GMDB reserves
     in future policy benefits. These reserves are currently sufficient to cover
     the reserves required by this PSOP. The effective date of this PSOP is for
     fiscal years beginning after December 15, 2003, with earlier adoption
     encouraged. The adoption of this PSOP will not have a significant effect on
     the Company's results of operations, financial condition or liquidity.

     The statements above are forward-looking statements within the meaning of
     the Private Securities Litigation Reform Act. See "Forward-Looking
     Statements" on page 15.

     PRIMERICA LIFE INSURANCE

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,                          2002        2001
------------------------------------                     ------      ------
<S>                                                      <C>         <C>
($ in millions)

     Revenues                                            $1,581      $1,613
                                                         ======      ======

     Net income                                          $  409      $  446

     Net realized (gains)                                    (2)        (48)

     Change in accounting principle                           -           1
                                                         ------      ------
     Operating income                                    $  407      $  399
                                                         ======      ======
</TABLE>

     Net income decreased 8% to $409 million due to net realized investment
     gains of $2 million, including the impairment of the fixed maturities
     portfolio investment in WorldCom Inc. totaling $4 million, net of tax,
     compared to $48 million of net realized investments gains in 2001.

     Operating income was $407 million in 2002 compared to $399 million in 2001.
     The 2% improvement in 2002 reflects growth in life insurance in force and
     the discontinuance of goodwill amortization in accordance with Financial
     Accounting Standards Board Statement of Financial Accounting Standards No.
     142, "Goodwill and Other Intangible Assets," offset by lower portfolio
     return due to a declining interest rate environment. The increase in
     expense for DAC is the result of an increase in life insurance production.
     Other general expense increased slightly consistent with the increase in
     in-force. Mortality experience was unchanged in 2002, however, there was an
     increase in incurred claims. This increase is provided for by growth in the
     in-force, associated premium revenues and policyholders reserve balances.

                                       13

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     The amortization of capitalized DAC is a significant component of Primerica
     Life's expenses. All of Primerica Life's DAC is associated with FAS 60
     products. DAC is amortized in relation to anticipated premiums as per FAS
     60. Amortized DAC has remained level as a percentage of direct premiums.
     The increase in the amount of amortization over 2001 is associated with
     growth in sales and in-force.

     The following is a summary of capitalized DAC:

<TABLE>
<CAPTION>
In millions of dollars
---------------------------------------------------------------
<S>                                                      <C>
Balance December 31, 2000                                $1,698
---------------------------------------------------------------

Deferred expenses and other                                 298
Amortization expense                                       (208)

---------------------------------------------------------------
Balance December 31, 2001                                 1,788
---------------------------------------------------------------

Deferred expenses and other                                 323
Amortization expense                                       (219)

---------------------------------------------------------------
Balance December 31, 2002                                $1,892
---------------------------------------------------------------
</TABLE>

     EARNED PREMIUMS, NET OF REINSURANCE

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,                          2002        2001
------------------------------------                     ------      ------
<S>                                                      <C>         <C>
($ in millions)

         Individual term life                            $1,127      $1,078

         Other                                               67          67
                                                         ------      ------
                                                         $1,194      $1,145
                                                         ======      ======
</TABLE>

     The total face amount of term life insurance issued was $79.3 billion in
     2002 compared to $71.5 billion in 2001. This increase in term life
     production resulted from the increase in licensed life representatives.
     Life insurance in force at year-end 2002 reached $466.8 billion, up from
     $434.8 billion at year-end 2001, reflecting consistent good in-force policy
     retention and higher volume of sales.

     OUTLOOK

     Over the last few years, programs including sales and product training have
     been designed to maintain high compliance standards, increase the number of
     producing agents and customer contacts and, ultimately, increase production
     levels. Insurance in force has grown and the number of producing agents has
     also grown. A continuation of these trends could positively influence
     future operations. This statement is a forward-looking statement within the
     meaning of the Private Securities Litigation Reform Act. See
     "Forward-Looking Statements" on page 15.

                                       14

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K


     FUTURE APPLICATION OF ACCOUNTING STANDARDS

     See Note 1 of Notes to Consolidated Financial Statements for Future
     Applications of Accounting Standards.

     FORWARD-LOOKING STATEMENTS

     Certain of the statements contained herein that are not historical facts
     are forward-looking statements within the meaning of the Private Securities
     Litigation Reform Act. The Company's actual results may differ materially
     from those included in the forward-looking statements. Forward-looking
     statements are typically identified by the words "believe," "expect,"
     "anticipate," "intend," "estimate," "may increase," "may fluctuate," and
     similar expressions, or future or conditional verbs such as "will,"
     "should," "would," and "could." These forward-looking statements involve
     risks and uncertainties including, but not limited to, regulatory matters,
     the resolution of legal proceedings and the Company's market risk, as well
     as the discussions of the Company's prospects under "Outlook" for each of
     the businesses.

     ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk is the risk of loss arising from adverse changes in market
     rates and prices, such as interest rates, foreign currency exchange rates,
     and other relevant market rate or price changes. Market risk is directly
     influenced by the volatility and liquidity in the markets in which the
     related underlying assets are traded. The following is a discussion of the
     Company's primary market risk exposures and how those exposures are
     currently managed as of December 31, 2002.

     MARKET RISK SENSITIVE INSTRUMENTS ENTERED INTO FOR PURPOSES OTHER THAN
     TRADING

     The primary market risk to the Company's investment portfolio is interest
     rate risk associated with investments. The Company's exposure to equity
     price risk and foreign exchange risk is not significant. The Company has no
     direct commodity risk.

     The interest rate risk taken in the investment portfolio is managed
     relative to the duration of the liabilities. The portfolio is
     differentiated by product line, with each product line's portfolio
     structured to meet its particular needs. Potential liquidity needs of the
     business are also key factors in managing the investment portfolio. The
     portfolio duration relative to the liabilities' duration is primarily
     managed through cash market transactions. For additional information
     regarding the Company's investment portfolio see Note 4 of Notes to
     Consolidated Financial Statements.

     There were no significant changes in the Company's primary market risk
     exposures or in how those exposures are managed compared to the year ended
     December 31, 2001. The Company does not anticipate significant changes in
     the Company's primary market risk exposures or in how those exposures are
     managed in future reporting periods based upon what is known or expected to
     be in effect in future reporting periods. The statements above are
     forward-looking statements within the meaning of the Private Securities
     Litigation Reform Act. See "Forward-Looking Statements" on page 15.


                                       15

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

     SENSITIVITY ANALYSIS

     Sensitivity analysis is defined as the measurement of potential loss in
     future earnings, fair values or cash flows of market sensitive instruments
     resulting from one or more selected hypothetical changes in interest rates
     and other market rates or prices over a selected time. In the Company's
     sensitivity analysis model, a hypothetical change in market rates is
     selected that is expected to reflect reasonably possible near-term changes
     in those rates. The term "near-term" means a period of time going forward
     up to one year from the date of the financial statements. Actual results
     may differ from the hypothetical change in market rates assumed in this
     report, especially since this sensitivity analysis does not reflect the
     results of any actions that would be taken by the Company to mitigate such
     hypothetical losses in fair value.

     In this sensitivity analysis model, the Company uses fair values to measure
     its potential loss. The sensitivity analysis model includes the following
     financial instruments: fixed maturities, interest-bearing non-redeemable
     preferred stock, mortgage loans, short-term securities, cash, investment
     income accrued, policy loans, contractholder funds, guaranteed separate
     account assets and liabilities and derivative financial instruments. In
     addition, certain non-financial instrument liabilities have been included
     in the sensitivity analysis model. These non-financial instruments include
     future policy benefits and policy and contract claims. The primary market
     risk to the Company's market sensitive instruments is interest rate risk.
     The sensitivity analysis model uses a 100 basis point change in interest
     rates to measure the hypothetical change in fair value of financial
     instruments and the non-financial instruments included in the model.

     For invested assets, duration modeling is used to calculate changes in fair
     values. Durations on invested assets are adjusted for call, put and reset
     features. Portfolio durations are calculated on a market value weighted
     basis, including accrued investment income, using trade date holdings as of
     December 31, 2002 and 2001. The sensitivity analysis model used by the
     Company produces a loss in fair value of interest rate sensitive invested
     assets of approximately $1.9 billion and $1.7 billion based on a 100 basis
     point increase in interest rates as of December 31, 2002 and 2001,
     respectively.

     Liability durations are determined consistently with the determination of
     liability fair values. Where fair values are determined by discounting
     expected cash flows, the duration is the percentage change in the fair
     value for a 100 basis point change in the discount rate. Where liability
     fair values are set equal to surrender values, option-adjusted duration
     techniques are used to calculate changes in fair values. The sensitivity
     analysis model used by the Company produces a decrease in fair value of
     interest rate sensitive insurance policy and claims reserves of
     approximately $1.5 billion and $1.3 billion based on a 100 basis point
     increase in interest rates as of December 31, 2002 and 2001, respectively.
     Based on the sensitivity analysis model used by the Company, the net loss
     in fair value of market sensitive instruments, including non-financial
     instrument liabilities, as a result of a 100 basis point increase in
     interest rates as of December 31, 2002 and 2001 is not material.

     MARKET RISK SENSITIVE INSTRUMENTS ENTERED INTO FOR TRADING PURPOSES

     The Company maintains a trading portfolio through Tribeca Citigroup
     Investments Ltd. consisting of carrying values of $1,531 million and $1,880
     million of convertible bonds and common stocks as of December 31, 2002 and
     2001, respectively, and $598 million and $891 million of liabilities
     resulting from common stocks sold not yet purchased (referred to as short
     sales) as of December 31, 2002 and 2001, respectively. The primary market
     risk to the trading portfolio is equity risk. Assets are reported as
     trading securities and liabilities are reported as trading securities sold
     not yet purchased.

                                       16

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K


     The common stocks are paired with short sales, reflecting the Company's
     arbitrage strategy where both positions are invested in each of the
     companies involved in a merger. The convertible bonds are also paired with
     short sales of the common stocks of companies issuing the convertible
     bonds. These positions are established and maintained so that general
     changes in equity markets and interest rates should not materially impact
     the value of the portfolio.

     TABULAR PRESENTATION

     The table below provides information about the trading portfolio's
     financial instruments that are primarily exposed to equity price risk. This
     table presents the fair values of these instruments by trading portfolio
     type, as designated internally by the Company, as of December 31, 2002 and
     2001. Fair values are based upon quoted market prices.

<TABLE>
<CAPTION>
                                                           Fair value as of         Fair value as of
($ in millions)                                            December 31, 2002        December 31, 2001
---------------                                            -----------------        -----------------
<S>                                                        <C>                      <C>
ASSETS
    Trading securities
       Convertible bond arbitrage                               $1,442                     $1,798
       Merger arbitrage                                             47                         80
       Other                                                        42                          2
                                                                ------                     ------
                                                                $1,531                     $1,880
                                                                ======                     ======
LIABILITIES
    Trading securities sold not yet purchased
       Convertible bond arbitrage                               $  520                     $  836
       Merger arbitrage                                             13                         51
       Other                                                        65                          4
                                                                ------                     ------
                                                                $  598                     $  891
                                                                ======                     ======
</TABLE>

     The Company's trading portfolio investments and related liabilities are
     normally held for periods less than six months. Therefore, expected future
     cash flows for these assets and liabilities are expected to be realized in
     less than one year.

                                       17

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                                      PAGE
                                                                                                                      ----
<S>                                                                                                                 <C>
Independent Auditors' Report......................................................................................     19

Consolidated Financial Statements:

   Consolidated Statements of Income for
   the years ended December 31, 2002, 2001 and 2000...............................................................     20

   Consolidated Balance Sheets - December 31, 2002 and 2001.......................................................     21

   Consolidated Statements of Changes in Shareholder's Equity
   for the years ended December 31, 2002, 2001 and 2000...........................................................     22

   Consolidated Statements of Cash Flows for
   the years ended December 31, 2002, 2001 and 2000...............................................................     23

   Notes to Consolidated Financial Statements.....................................................................  24-60
</TABLE>

                                       18

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

     The Board of Directors and Shareholder
     The Travelers Insurance Company:

     We have audited the accompanying consolidated balance sheets of The
     Travelers Insurance Company and subsidiaries as of December 31, 2002 and
     2001, and the related consolidated statements of income, changes in
     shareholder's equity and cash flows for each of the years in the three-year
     period ended December 31, 2002. These consolidated financial statements are
     the responsibility of the Company's management. Our responsibility is to
     express an opinion on these consolidated financial statements based on our
     audits.

     We conducted our audits in accordance with auditing standards generally
     accepted in the United States of America. Those standards require that we
     plan and perform the audit to obtain reasonable assurance about whether the
     financial statements are free of material misstatement. An audit includes
     examining, on a test basis, evidence supporting the amounts and disclosures
     in the financial statements. An audit also includes assessing the
     accounting principles used and significant estimates made by management, as
     well as evaluating the overall financial statement presentation. We believe
     that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
     present fairly, in all material respects, the financial position of The
     Travelers Insurance Company and subsidiaries as of December 31, 2002 and
     2001, and the results of their operations and their cash flows for each of
     the years in the three-year period ended December 31, 2002, in conformity
     with accounting principles generally accepted in the United States of
     America. As discussed in Note 1 to the consolidated financial statements,
     the Company changed its method of accounting for goodwill and other
     intangible assets in 2002, and its methods of accounting for derivative
     instruments and hedging activities and for securitized financial assets in
     2001.

     /s/ KPMG LLP

     Hartford, Connecticut
     January 21, 2003

                                       19

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                 ($ in millions)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,                                                         2002          2001          2000
                                                                                       ------        ------        ------
<S>                                                                                    <C>           <C>           <C>
REVENUES
Premiums                                                                               $1,924        $ 2,102       $ 1,966
Net investment income                                                                   2,936          2,831         2,730
Realized investment gains (losses)                                                       (322)           125           (77)
Fee income                                                                                560            537           528
Other revenues                                                                            136            107           107
--------------------------------------------------------------------------------------------------------------------------
   Total Revenues                                                                       5,234          5,702         5,254
--------------------------------------------------------------------------------------------------------------------------

BENEFITS AND EXPENSES
Current and future insurance benefits                                                   1,711          1,862         1,752
Interest credited to contractholders                                                    1,220          1,179         1,038
Amortization of deferred acquisition costs                                                393            379           347
General and administrative expenses                                                       407            371           463
--------------------------------------------------------------------------------------------------------------------------
   Total Benefits and Expenses                                                          3,731          3,791         3,600
--------------------------------------------------------------------------------------------------------------------------

Income from operations before federal income taxes and cumulative
  effects of changes in accounting principles                                           1,503          1,911         1,654
--------------------------------------------------------------------------------------------------------------------------

Federal income taxes
   Current                                                                                236            471           462
   Deferred                                                                               185            159            89
--------------------------------------------------------------------------------------------------------------------------
   Total Federal Income Taxes                                                             421            630           551
--------------------------------------------------------------------------------------------------------------------------
Income before cumulative effects of changes in accounting principles                    1,082          1,281         1,103

Cumulative effect of change in accounting for derivative instruments and
  hedging activities, net of tax                                                            -             (6)            -

Cumulative effect of change in accounting for securitized financial assets,
  net of tax                                                                                -             (3)            -
--------------------------------------------------------------------------------------------------------------------------
Net Income                                                                             $1,082        $ 1,272       $ 1,103
==========================================================================================================================
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       20

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 ($ in millions)

<TABLE>
<CAPTION>
AT DECEMBER 31,                                                                                       2002          2001
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                  <C>           <C>
ASSETS
Fixed maturities, available for sale at fair value (including $2,687 and $2,330
 subject to securities lending agreements) (cost $35,428; $31,730)                                   $36,434       $32,072
Equity securities, at fair value (cost $328; $471)                                                       332           472
Mortgage loans                                                                                         1,985         1,995
Real estate                                                                                               36            55
Policy loans                                                                                           1,168         1,208
Short-term securities                                                                                  4,414         3,053
Trading securities, at fair value                                                                      1,531         1,880
Other invested assets                                                                                  4,909         2,485
--------------------------------------------------------------------------------------------------------------------------
   Total Investments                                                                                  50,809        43,220
--------------------------------------------------------------------------------------------------------------------------

Cash                                                                                                     186           146
Investment income accrued                                                                                525           487
Premium balances receivable                                                                              151           137
Reinsurance recoverables                                                                               4,301         4,163
Deferred acquisition costs                                                                             3,936         3,461
Separate and variable accounts                                                                        21,620        24,837
Other assets                                                                                           1,467         1,415
--------------------------------------------------------------------------------------------------------------------------
   Total Assets                                                                                      $82,995       $77,866
--------------------------------------------------------------------------------------------------------------------------

LIABILITIES
Contractholder funds                                                                                 $26,634       $22,810
Future policy benefits and claims                                                                     15,009        14,221
Separate and variable accounts                                                                        21,620        24,837
Deferred federal income taxes                                                                          1,448           409
Trading securities sold not yet purchased, at fair value                                                 598           891
Other liabilities                                                                                      6,051         5,518
--------------------------------------------------------------------------------------------------------------------------
   Total Liabilities                                                                                  71,360        68,686
--------------------------------------------------------------------------------------------------------------------------

SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million shares authorized, issued and outstanding                      100           100
Additional paid-in capital                                                                             5,443         3,864
Retained earnings                                                                                      5,638         5,142
Accumulated other changes in equity from nonowner sources                                                454            74
--------------------------------------------------------------------------------------------------------------------------
   Total Shareholder's Equity                                                                         11,635         9,180
--------------------------------------------------------------------------------------------------------------------------

   Total Liabilities and Shareholder's Equity                                                        $82,995       $77,866
==========================================================================================================================
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       21

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
                                 ($ in millions)

<TABLE>
<CAPTION>
                                                                                         FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------------------
COMMON STOCK                                                                            2002          2001          2000
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>            <C>           <C>
Balance, beginning of year                                                            $    100       $   100       $   100
Changes in common stock                                                                      -             -             -
--------------------------------------------------------------------------------------------------------------------------
Balance, end of year                                                                  $    100       $   100       $   100
==========================================================================================================================

--------------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
--------------------------------------------------------------------------------------------------------------------------
Balance, beginning of year                                                            $  3,864       $ 3,843       $ 3,819
Stock option tax benefit (expense)                                                         (17)           21            24
Capital contributed by parent                                                            1,596             -             -
--------------------------------------------------------------------------------------------------------------------------
Balance, end of year                                                                  $  5,443       $ 3,864       $ 3,843
==========================================================================================================================

--------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
--------------------------------------------------------------------------------------------------------------------------

Balance, beginning of year                                                            $  5,142       $ 4,342       $ 4,099
Net income                                                                               1,082         1,272         1,103
Dividends to parent                                                                       (586)         (472)         (860)
--------------------------------------------------------------------------------------------------------------------------
Balance, end of year                                                                  $  5,638       $ 5,142       $ 4,342
==========================================================================================================================

--------------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER CHANGES
IN EQUITY FROM NONOWNER SOURCES
--------------------------------------------------------------------------------------------------------------------------

Balance, beginning of year                                                            $     74       $   104       $  (398)
Cumulative effect of accounting for
  derivative instruments and hedging activities, net
  of tax                                                                                     -           (29)            -
Unrealized gains, net of tax                                                               455            68           501
Foreign currency translation, net of tax                                                     3            (3)            1
Derivative instrument hedging activity losses, net
  of tax                                                                                   (78)          (66)            -
--------------------------------------------------------------------------------------------------------------------------
Balance, end of year                                                                  $    454       $    74       $   104
==========================================================================================================================

--------------------------------------------------------------------------------------------------------------------------
SUMMARY OF CHANGES IN EQUITY
FROM NONOWNER SOURCES
--------------------------------------------------------------------------------------------------------------------------

Net income                                                                            $  1,082       $ 1,272       $ 1,103
Other changes in equity from nonowner sources                                              380           (30)          502
--------------------------------------------------------------------------------------------------------------------------
Total changes in equity from nonowner sources                                         $  1,462       $ 1,242       $ 1,605
==========================================================================================================================

--------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDER'S EQUITY
--------------------------------------------------------------------------------------------------------------------------
Changes in total shareholders' equity                                                 $  2,455       $   791       $   769
Balance, beginning of year                                                               9,180         8,389         7,620
--------------------------------------------------------------------------------------------------------------------------
Balance, end of year                                                                  $11,635        $ 9,180       $ 8,389
==========================================================================================================================
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       22

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           INCREASE (DECREASE) IN CASH
                                 ($ in millions)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,                                                         2002           2001          2000
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Premiums collected                                                                $ 1,917       $ 2,109       $ 1,986
     Net investment income received                                                      2,741         2,430         2,489
     Other revenues received                                                               384           867           865
     Benefits and claims paid                                                           (1,218)       (1,176)       (1,193)
     Interest credited to contractholders                                               (1,220)       (1,159)       (1,046)
     Operating expenses paid                                                            (1,022)       (1,000)         (970)
     Income taxes paid                                                                    (197)         (472)         (490)
     Trading account investments (purchases), sales, net                                    76           (92)         (143)
     Other                                                                                (393)         (227)         (258)
--------------------------------------------------------------------------------------------------------------------------
         Net Cash Provided by Operating Activities                                       1,068         1,280         1,240
--------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from maturities of investments
         Fixed maturities                                                                4,459         3,706         4,257
         Mortgage loans                                                                    374           455           380
     Proceeds from sales of investments
         Fixed maturities                                                               15,472        14,110        10,840
         Equity securities                                                                 945           112           397
         Real estate held for sale                                                          26             6           244
     Purchases of investments
         Fixed maturities                                                              (23,623)      (22,556)      (17,836)
         Equity securities                                                                (867)          (50)           (7)
         Mortgage loans                                                                   (355)         (287)         (264)
     Policy loans, net                                                                      39            41             9
     Short-term securities purchases, net                                               (1,320)         (914)         (810)
     Other investments (purchases), sales, net                                             (69)          103          (461)
     Securities transactions in course of settlement, net                                  529         1,086           944
--------------------------------------------------------------------------------------------------------------------------
     Net Cash Used in Investing Activities                                              (4,390)       (4,188)       (2,307)
--------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Contractholder fund deposits                                                        8,505         8,308         6,022
     Contractholder fund withdrawals                                                    (4,729)       (4,932)       (4,030)
     Capital contribution by parent                                                        172             -             -
     Dividends to parent company                                                          (586)         (472)         (860)
--------------------------------------------------------------------------------------------------------------------------
         Net Cash Provided by Financing Activities                                       3,362         2,904         1,132
--------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash                                                             40            (4)           65
Cash at December 31, previous year                                                         146           150            85
--------------------------------------------------------------------------------------------------------------------------
Cash at December 31, current year                                                      $   186       $   146       $   150
==========================================================================================================================
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       23

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Significant accounting policies used in the preparation of the accompanying
     financial statements follow.

     BASIS OF PRESENTATION

     The Travelers Insurance Company (TIC, together with its subsidiaries, the
     Company), is a wholly owned subsidiary of Citigroup Insurance Holding
     Corporation (CIHC), an indirect wholly owned subsidiary of Citigroup Inc.
     (Citigroup), a diversified global financial services holding company whose
     businesses provide a broad range of financial services to consumer and
     corporate customers around the world. The consolidated financial statements
     include the accounts of the Company and its insurance and non-insurance
     subsidiaries on a fully consolidated basis. The primary insurance entities
     of the Company are TIC and its subsidiaries, The Travelers Life and Annuity
     Company (TLAC), Primerica Life Insurance Company (Primerica Life), and its
     subsidiaries, Primerica Life Insurance Company of Canada, CitiLife
     Financial Limited (CitiLife) and National Benefit Life Insurance Company
     (NBL). Significant intercompany transactions and balances have been
     eliminated.

     At December 31, 2001, the Company was a wholly owned subsidiary of The
     Travelers Insurance Group, Inc. (TIGI). On February 4, 2002, TIGI changed
     its name to Travelers Property Casualty Corp. (TPC). TPC completed its
     initial public offering (IPO) on March 27, 2002 and on August 20, 2002
     Citigroup made a tax-free distribution of the majority of its remaining
     interest in TPC, to Citigroup's stockholders. Prior to the IPO, the common
     stock of TIC was distributed by TPC to CIHC so that TIC would remain an
     indirect wholly owned subsidiary of Citigroup. See Note 15.

     The financial statements and accompanying footnotes of the Company are
     prepared in conformity with accounting principles generally accepted in the
     United States of America (GAAP). The preparation of financial statements in
     conformity with GAAP requires management to make estimates and assumptions
     that affect the reported amounts of assets and liabilities and disclosure
     of contingent assets and liabilities at the date of the financial
     statements and the reported amounts of revenues and benefits and expenses
     during the reporting period. Actual results could differ from those
     estimates.

     Certain prior year amounts have been reclassified to conform to the 2002
     presentation.

     ACCOUNTING CHANGES

     BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
     Effective January 1, 2002, the Company adopted the Financial Accounting
     Standards Board (FASB) Statements of Financial Accounting Standards No.
     141, "Business Combinations" (FAS 141) and No. 142, "Goodwill and Other
     Intangible Assets" (FAS 142). These standards change the accounting for
     business combinations by, among other things, prohibiting the prospective
     use of pooling-of-interests accounting and requiring companies to stop
     amortizing goodwill and certain intangible assets with an indefinite useful
     life created by business combinations accounted for using the purchase
     method of accounting. Instead, goodwill and intangible assets deemed to
     have an indefinite useful life will be subject to an annual review for
     impairment. Other intangible assets that are not deemed to have an
     indefinite useful life will continue to be amortized over their useful
     lives. See Note 6.

                                       24

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)

     The Company stopped amortizing goodwill on January 1, 2002. During 2001,
     the Company reversed $8 million of negative goodwill. Net income adjusted
     to exclude the impact of goodwill amortization for the twelve months ended
     December 31, 2001 is as follows:

<TABLE>
<CAPTION>
                                                           Twelve Months
                                                               Ended
($ in millions)                                          December 31, 2001
                                                         -----------------
<S>                                                      <C>
Net income:
    Reported net income                                       $1,272
    Negative goodwill reversal                                    (8)
    Goodwill amortization                                          7
                                                              ------
    Adjusted net income                                       $1,271
                                                              ======
</TABLE>

     IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

     Effective January 1, 2002, the Company adopted the FASB Statement of
     Financial Accounting Standards No. 144, "Accounting for the Impairment or
     Disposal of Long-Lived Assets" (FAS 144). FAS 144 establishes a single
     accounting model for long-lived assets to be disposed of by sale. A
     long-lived asset classified as held for sale is to be measured at the lower
     of its carrying amount or fair value less cost to sell. Depreciation
     (amortization) is to cease. Impairment is recognized only if the carrying
     amount of a long-lived asset is not recoverable from its undiscounted cash
     flows and is measured as the difference between the carrying amount and
     fair value of the asset. Long-lived assets to be abandoned, exchanged for a
     similar productive asset, or distributed to owners in a spin-off are
     considered held and used until disposed of. Accordingly, discontinued
     operations are no longer to be measured on a net realizable value basis,
     and future operating losses are no longer recognized before they occur. The
     provisions of the new standard are to be applied prospectively.

     There has been no impact as of December 31, 2002 on the Company's results
     of operations, financial condition or liquidity due to this standard. The
     Company does not expect the impact of this standard to be significant in
     future reporting periods.

     ACCOUNTING STANDARDS NOT YET ADOPTED

     COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

     On January 1, 2003, the Company adopted the FASB Statement of Financial
     Accounting Standards No. 146, "Accounting for Costs Associated with Exit or
     Disposal Activities" (FAS 146). FAS 146 requires that a liability for costs
     associated with exit or disposal activities, other than in a business
     combination, be recognized when the liability is incurred. Previous
     generally accepted accounting principles provided for the recognition of
     such costs at the date of management's commitment to an exit plan. In
     addition, FAS 146 requires that the liability be measured at fair value and
     be adjusted for changes in estimated cash flows. The provisions of the new
     standard are effective for exit or disposal activities initiated after
     December 31, 2002. It is not expected that FAS 146 will materially affect
     the Company's consolidated financial statements.

                                       25

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     STOCK BASED COMPENSATION

     On January 1, 2003, the Company adopted the fair value recognition
     provisions of Statement of Financial Accounting Standards No. 123 (FAS
     123), prospectively for all awards granted, modified, or settled after
     December 31, 2002. The prospective method is one of the adoption methods
     provided for under FAS No. 148, "Accounting for Stock-Based Compensation -
     Transition and Disclosure," issued in December 2002. FAS 123 requires that
     compensation cost for all stock awards be calculated and recognized over
     the service period (generally equal to the vesting period). This
     compensation cost is determined using option pricing models, intended to
     estimate the fair value of the awards at the grant date. Similar to APB 25,
     the alternative method of accounting, an offsetting increase to
     stockholders' equity under FAS 123 is recorded equal to the amount of
     compensation expense charged.

     Had the Company applied FAS 123 in accounting for Citigroup stock options,
     net income would have been the pro forma amounts indicated below:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
($ in millions)                                            2002             2001            2000
--------------------------------------------------------------------------------------------------
<S>                                                     <C>              <C>             <C>
Net income, as reported                                 $   1,082        $   1,272       $   1,103
FAS 123 pro forma adjustments, after tax                       (9)             (15)            (19)
--------------------------------------------------------------------------------------------------
Net income, pro forma                                   $   1,073        $   1,257       $   1,084
--------------------------------------------------------------------------------------------------
</TABLE>

     The assumptions used in applying FAS 123 to account for Citigroup stock
     options were as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,                                    2002            2001             2000
--------------------------------------------------------------------------------------------------
<S>                                                     <C>              <C>             <C>
Expected volatility of Citigroup Stock                      36.98%           38.31%           41.5%
Risk-free interest rate                                      3.65%            4.42%           6.23%
--------------------------------------------------------------------------------------------------
Expected annual dividend per Citigroup share            $    0.92        $    0.92       $    0.78
--------------------------------------------------------------------------------------------------
Expected annual forfeiture rate                                 7%               5%              5%
--------------------------------------------------------------------------------------------------
</TABLE>

     The adoption of this change in accounting principle will not have a
     significant impact on the Company's results of operations, financial
     condition or liquidity.

     CONSOLIDATION OF VARIABLE INTEREST ENTITIES

     In January 2003, the FASB released FASB Interpretation No. 46,
     "Consolidation of Variable Interest Entities" (FIN 46). This Interpretation
     changes the method of determining whether certain entities should be
     included in the Company's Consolidated Financial Statements. An entity is
     subject to FIN 46 and is called a variable interest entity (VIE) if it has
     (1) equity that is insufficient to permit the entity to finance its
     activities without additional subordinated financial support from other
     parties, or (2) equity investors that cannot make significant decisions
     about the entity's operations, or that do not absorb the expected losses or
     receive the expected returns of the entity. All other entities are
     evaluated for consolidation under FAS No. 94, "Consolidation of All
     Majority-Owned Subsidiaries." A VIE is consolidated by its primary
     beneficiary, which is the party involved with the VIE that has a majority
     of the expected losses or a majority of the expected residual returns or
     both.


                                       26

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     The provisions of FIN 46 are to be applied immediately to VIEs created
     after January 31, 2003, and to VIEs in which an enterprise obtains an
     interest after that date. For VIEs in which an enterprise holds a variable
     interest that it acquired before February 1, 2003, FIN 46 applies in the
     first fiscal period beginning after June 15, 2003. For any VIEs that must
     be consolidated under FIN 46 that were created before February 1, 2003, the
     assets, liabilities and noncontrolling interest of the VIE would be
     initially measured at their carrying amounts with any difference between
     the net amount added to the balance sheet and any previously recognized
     interest being recognized as the cumulative effect of an accounting change.
     If determining the carrying amounts is not practicable, fair value at the
     date FIN 46 first applies may be used to measure the assets, liabilities
     and noncontrolling interest of the VIE. FIN 46 also mandates new
     disclosures about VIEs, some of which are required to be presented in
     financial statements issued after January 31, 2003.

     The Company has investments in entities that may be considered to be
     variable interests. The carrying value of investments is approximately $1.3
     billion and primarily consists of interests in security and real estate
     investment funds, and below investment grade asset-backed and
     mortgage-backed securities, and a collateralized bond obligation. The
     Company is evaluating the impact of applying FIN 46 to existing VIEs in
     which it has variable interests and has not yet completed this analysis.
     However, at this time, it is anticipated that the effect on the Company's
     Consolidated Balance Sheets could be an increase of less than $1 billion to
     assets and liabilities. As the Company continues to evaluate the impact of
     applying FIN 46, additional entities may be identified that would need to
     be consolidated.

     ACCOUNTING POLICIES

     INVESTMENTS

     Fixed maturities include bonds, notes and redeemable preferred stocks.
     Fixed maturities, including instruments subject to securities lending
     agreements (see Note 4), are classified as "available for sale" and are
     reported at fair value, with unrealized investment gains and losses, net of
     income taxes, credited or charged directly to shareholder's equity. Fair
     values of investments in fixed maturities are based on quoted market prices
     or dealer quotes. If quoted market prices are not available, discounted
     expected cash flows using market rates commensurate with the credit quality
     and maturity of the investment are used to record fair value. Changes in
     assumptions could affect the fair values of fixed maturities. Impairments
     are realized when investment losses in value are deemed
     other-than-temporary. The Company conducts regular reviews to assess
     whether other-than-temporary impairments exist. Changing economic
     conditions - global, regional, or related to specific issuers or industries
     - could adversely affect these values.

     Also included in fixed maturities are loan-backed and structured
     securities, which are amortized using the retrospective method. The
     effective yield used to determine amortization is calculated based upon
     actual historical and projected future cash flows, which are obtained from
     a widely accepted securities data provider.

     Equity securities, which include common and non-redeemable preferred
     stocks, are classified as "available for sale" and carried at fair value
     based primarily on quoted market prices. Changes in fair values of equity
     securities are charged or credited directly to shareholder's equity, net of
     income taxes.

     Mortgage loans are carried at amortized cost. A mortgage loan is considered
     impaired when it is probable that the Company will be unable to collect
     principal and interest amounts due. For mortgage loans that are determined
     to be impaired, a reserve is established for the difference between the
     amortized cost and fair market value of the underlying collateral. In
     estimating fair value, the Company uses interest rates reflecting the
     higher returns required in the current real estate financing market.


                                       27
<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     Real estate held for sale is carried at the lower of cost or fair value
     less estimated cost to sell. Fair value of foreclosed properties is
     established at the time of foreclosure by internal analysis or external
     appraisers, using discounted cash flow analyses and other accepted
     techniques. Thereafter, an allowance for losses on real estate held for
     sale is established if the carrying value of the property exceeds its
     current fair value less estimated costs to sell. There was no such
     allowance at December 31, 2002 and 2001.

     Policy loans are carried at the amount of the unpaid balances that are not
     in excess of the net cash surrender values of the related insurance
     policies. The carrying value of policy loans, which have no defined
     maturities, is considered to be fair value.

     Short-term securities, consisting primarily of money market instruments and
     other debt issues purchased with a maturity of less than one year, are
     carried at amortized cost, which approximates fair value.

     Trading securities and related liabilities are normally held for periods
     less than six months. These investments are marked to market with the
     change recognized in net investment income during the current period.

     Other invested assets include partnership investments and real estate joint
     ventures accounted for on the equity method of accounting. Undistributed
     income is reported in net investment income. Also included in other
     invested assets is an investment in Citigroup Preferred Stock. See Note 14.

     Accrual of income is suspended on fixed maturities or mortgage loans that
     are in default, or on which it is likely that future payments will not be
     made as scheduled. Interest income on investments in default is recognized
     only as payment is received.

     DERIVATIVE FINANCIAL INSTRUMENTS

     The Company uses derivative financial instruments, including financial
     futures contracts, swaps, options and forward contracts, as a means of
     hedging exposure to interest rate changes, equity price change and foreign
     currency risk. The Company also uses derivative financial instruments to
     enhance portfolio income and replicate cash market investments. The
     Company, through Tribeca Citigroup Investments Ltd., holds and issues
     derivative instruments in conjunction with these funding strategies. (See
     Note 12 for a more detailed description of the Company's derivative use.)
     Derivative financial instruments in a gain position are reported in the
     consolidated balance sheet in other assets, derivative financial
     instruments in a loss position are reported in the consolidated balance
     sheet in other liabilities and derivatives purchased to offset embedded
     derivatives on variable annuity contracts are reported in other invested
     assets.

     To qualify for hedge accounting, the hedge relationship is designated and
     formally documented at inception detailing the particular risk management
     objective and strategy for the hedge which includes the item and risk that
     is being hedged, the derivative that is being used, as well as how
     effectiveness is being assessed. A derivative has to be highly effective in
     accomplishing the objective of offsetting either changes in fair value or
     cash flows for the risk being hedged.

     For fair value hedges, in which derivatives hedge the fair value of assets
     and liabilities, changes in the fair value of derivatives are reflected in
     realized investment gains and losses, together with changes in the fair
     value of the related hedged item. The Company primarily hedges
     available-for-sale securities.


                                       28

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     For cash flow hedges, the accounting treatment depends on the effectiveness
     of the hedge. To the extent that derivatives are effective in offsetting
     the variability of the hedged cash flows, changes in the derivatives' fair
     value will not be included in current earnings but are reported in the
     accumulated other changes in equity from nonowner sources in shareholder's
     equity. These changes in fair value will be included in earnings of future
     periods when earnings are also affected by the variability of the hedged
     cash flows. To the extent these derivatives are not effective, changes in
     their fair values are immediately included in realized investment gains and
     losses. The Company primarily hedges foreign denominated funding agreements
     and floating rate available-for-sale securities.

     For net investment hedges, in which derivatives hedge the foreign currency
     exposure of a net investment in a foreign operation, the accounting
     treatment will similarly depend on the effectiveness of the hedge. The
     effective portion of the change in fair value of the derivative, including
     any premium or discount, is reflected in the accumulated other changes in
     equity from nonowner sources as part of the foreign currency translation
     adjustment in shareholder's equity. The ineffective portion is reflected in
     realized investment gains and losses.

     Derivatives that are used to hedge instruments that are carried at fair
     value, do not qualify or are not designated as hedges, are also carried at
     fair value with changes in value reflected in realized investment gains and
     losses.

     The effectiveness of these hedging relationships is evaluated on a
     retrospective and prospective basis using quantitative measures of
     correlation. If a hedge relationship is found to be ineffective, it no
     longer qualifies as a hedge and any gains or losses attributable to such
     ineffectiveness as well as subsequent changes in fair value are recognized
     in realized investment gains and losses.

     For those hedge relationships that are terminated, hedge designations
     removed, or forecasted transactions that are no longer expected to occur,
     the hedge accounting treatment described in the paragraphs above will no
     longer apply. For fair value hedges, any changes to the hedged item remain
     as part of the basis of the asset or liability and are ultimately reflected
     as an element of the yield. For cash flow hedges, any changes in fair value
     of the end-user derivative remain in the accumulated other changes in
     equity from nonowner sources in shareholder's equity and are included in
     earnings of future periods when earnings are also affected by the
     variability of the hedged cash flow. If the hedged relationship is
     discontinued because a forecasted transaction will not occur when
     scheduled, any changes in fair value of the end-user derivative are
     immediately reflected in realized investment gains and losses.

     Financial instruments with embedded derivatives:

     The Company bifurcates an embedded derivative where the economic
     characteristics and risks of the embedded instrument are not clearly and
     closely related to the economic characteristics and risks of the host
     contract, the entire instrument would not otherwise be remeasured at fair
     value and a separate instrument with the same terms of the embedded
     instrument would meet the definition of a derivative under FAS 133.

     The Company purchases investments that have embedded derivatives, primarily
     convertible debt securities. These embedded derivatives are carried at fair
     value with changes in value reflected in realized investment gains and
     losses. Derivatives embedded in convertible debt securities are classified
     in the consolidated balance sheet as fixed maturity securities, consistent
     with the host instruments.

     The Company markets certain insurance contracts that have embedded
     derivatives, primarily variable annuity contracts with put options. These
     embedded derivatives are carried at fair value with changes in value

                                       29

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     reflected in realized investment gains and losses. Derivatives embedded in
     variable annuity contracts are classified in the consolidated balance sheet
     as future policyholder benefits and claims.

     Prior to the adoption of FAS 133 on January 1, 2001, end-user derivatives
     designated as qualifying hedges were accounted for consistently with the
     associated risk management strategy. Derivatives used for hedging purposes
     were generally accounted for using hedge accounting. Changes in value of
     the derivatives which were expected to substantially offset the changes in
     value of the hedged items qualified for hedge accounting. Hedges were
     monitored to ensure that there was a high correlation between the
     derivative instrument and the hedged investment. Derivatives that did not
     qualify for hedge accounting were marked to market with changes in market
     value reflected in the consolidated statement of income as realized gains
     and losses.

     Payments to be received or made under interest rate swaps were accrued and
     recognized in net investment income. Swaps hedging available for sale
     securities were carried at fair value with unrealized gains and losses, net
     of taxes, charged directly to shareholder's equity. Interest rate and
     currency swaps hedging liabilities were treated as off-balance sheet
     instruments. Gains and losses arising from financial future contracts were
     used to adjust the basis of hedged investments and were recognized in net
     investment income over the life of the investment. Gains and losses arising
     from equity index options were marked to market with changes in market
     value reflected in realized investment gains and losses. Forward contracts
     hedging investments were marked to market based on changes in the spot rate
     with changes in market value reflected in realized investment gains and
     losses and any forward premium or discount was recognized in net investment
     income over the life of the contract. Gains and losses from forward
     contracts hedging foreign operations were carried at fair value with
     unrealized gains and losses, net of taxes, charged directly to
     shareholder's equity.

     INVESTMENT GAINS AND LOSSES

     Realized investment gains and losses are included as a component of pre-tax
     revenues based upon specific identification of the investments sold on the
     trade date. Impairments are realized when investment losses in value are
     deemed other-than-temporary. The Company conducts regular reviews to assess
     whether other-than-temporary impairments exist. Changing economic
     conditions - global, regional, or related to specific issuers or industries
     - could adversely affect these investments. Also included in pre-tax
     revenues are gains and losses arising from the remeasurement of the local
     currency value of foreign investments to U.S. dollars, the functional
     currency of the Company. The foreign exchange effects of Canadian
     operations are included in unrealized gains and losses.

     DEFERRED ACQUISITION COSTS

     Costs of acquiring traditional life and health insurance, universal life,
     corporate owned life insurance (COLI), deferred annuities and payout
     annuities are deferred. These deferred acquisition costs (DAC) include
     principally commissions and certain expenses related to policy issuance,
     underwriting and marketing, all of which vary with and are primarily
     related to the production of new business. The method for determining
     amortization of deferred acquisition costs varies by product type based
     upon three different accounting pronouncements: Statement of Financial
     Accounting Standards No. 60, "Accounting and Reporting by Insurance
     Enterprises" (FAS 60), Statement of Financial Accounting Standards No. 91,
     "Accounting for Nonrefundable Fees and Costs Associated with Originating or
     Acquiring Loans and Initial Direct Costs of Leases" (FAS 91) and Statement
     of Financial Accounting Standards No. 97, "Accounting and Reporting by
     Insurance Enterprises for Certain Long Duration Contracts and for Realized
     Gains and Losses from the Sale of Investments" (FAS 97).

                                       30

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     DAC for deferred annuities, both fixed and variable, and payout annuities
     are amortized employing a level effective yield methodology per FAS 91 as
     permitted by AICPA Practice Bulletin 8. An amortization rate is developed
     using the outstanding DAC balance and projected account balances and is
     applied to actual account balances to determine the amount of DAC
     amortization. The projected account balances are derived using a model that
     contains assumptions related to investment returns and persistency. The
     model rate is evaluated periodically, at least annually, and the actual
     rate is reset in the following quarter and applied prospectively. A new
     amortization pattern is developed so that the DAC balances will be
     amortized over the remaining estimated life of the business. DAC for these
     products is currently being amortized over 10-15 years.

     DAC for universal life and COLI are amortized in relation to estimated
     gross profits from surrender charges, investment, mortality, and expense
     margins per FAS 97. Actual profits can vary from management's estimates,
     resulting in increases or decreases in the rate of amortization.
     Re-estimates of gross profits result in retrospective adjustments to
     earnings by a cumulative charge or credit to income. DAC for these products
     is currently being amortized over 16-25 years.

     DAC relating to traditional life, including term insurance, and health
     insurance are amortized in relation to anticipated premiums per FAS 60.
     Assumptions as to the anticipated premiums are made at the date of policy
     issuance or acquisition and are consistently applied over the life of the
     policy. DAC for these products is currently being amortized over 5-20
     years.

     DAC is reviewed to determine if it is recoverable from future income,
     including investment income, and if not recoverable, is charged to
     expenses. All other acquisition expenses are charged to operations as
     incurred. See Note 6.

     VALUE OF INSURANCE IN FORCE

     The value of insurance in force is an asset that was recorded in 1993 at
     the time of acquisition of the Company by Citigroup's predecessor. It
     represents the actuarially determined present value of anticipated profits
     to be realized from life insurance and annuities contracts at the date of
     acquisition using the same assumptions that were used for computing related
     liabilities where appropriate. The value of insurance in force was the
     actuarially determined present value of the projected future profits
     discounted at interest rates ranging from 14% to 18%. Traditional life
     insurance is amortized in relation to anticipated premiums; universal life
     is amortized in relation to estimated gross profits; and annuity contracts
     are amortized employing a level yield method. The value of insurance in
     force, which is included in other assets, is reviewed periodically for
     recoverability to determine if any adjustment is required. Adjustments, if
     any, are charged to income. See Note 6.

     SEPARATE AND VARIABLE ACCOUNTS

     Separate and variable accounts primarily represent funds for which
     investment income and investment gains and losses accrue directly to, and
     investment risk is borne by, the contractholders. Each account has specific
     investment objectives. The assets of each account are legally segregated
     and are not subject to claims that arise out of any other business of the
     Company. The assets of these accounts are carried at fair value. Certain
     other separate accounts provide guaranteed levels of return or benefits and
     the assets of these accounts are primarily carried at fair value.

                                       31

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     Amounts assessed to the separate account contractholders for management
     services are included in revenues. Deposits, net investment income and
     realized investment gains and losses for these accounts are excluded from
     revenues, and related liability increases are excluded from benefits and
     expenses.

     GOODWILL AND INTANGIBLE ASSETS

     Goodwill and intangible assets are included in other assets. Prior to the
     adoption of FASB Statements of Financial Accounting Standards No. 141,
     "Business Combinations" (FAS 141) and No. 142, "Goodwill and Other
     Intangible Assets" (FAS 142 in the first quarter of 2002, goodwill was
     being amortized on a straight-line basis principally over a 40-year period.
     The carrying amount of goodwill and other intangible assets is regularly
     reviewed for indication of impairment in value that in the view of
     management would be other-than-temporary. If it is determined that goodwill
     and other intangible assets are unlikely to be recovered, impairment is
     recognized on a discounted cash flow basis. See Note 6.

     Upon adoption of FAS 141 and FAS 142, the Company stopped amortizing
     goodwill and intangible assets deemed to have an infinite useful life.
     Instead, these assets are subject to an annual review for impairment. Other
     intangible assets that are not deemed to have an indefinite useful life
     will continue to be amortized over their useful lives. See Note 1, Summary
     of Significant Accounting Policies, Accounting Changes.

     CONTRACTHOLDER FUNDS

     Contractholder funds represent receipts from the issuance of universal
     life, COLI, pension investment, guaranteed investment contracts (GIC), and
     certain deferred annuity contracts. For universal life and COLI contracts,
     contractholder fund balances are increased by receipts for mortality
     coverage, contract administration, surrender charges and interest accrued,
     where one or more of these elements are not fixed or guaranteed. These
     balances are decreased by withdrawals, mortality charges and administrative
     expenses charged to the contractholder. Interest rates credited to
     contractholder funds related to universal life and COLI range from 4.1% to
     6.6%, with a weighted average interest rate of 4.5%.

     Pension investment, GICs and certain annuity contracts do not contain
     significant insurance risks and are considered investment type contracts.
     Contractholder fund balances are increased by receipts and credited
     interest, and reduced by withdrawals and administrative expenses charged to
     the contractholder. Interest rates credited to those investment-type
     contracts range from 1.45% to 10.0% with a weighted average interest rate
     of 4.9%.

     FUTURE POLICY BENEFITS

     Future policy benefits represent liabilities for future insurance policy
     benefits. The annuity payout reserves are calculated using the mortality
     and interest assumptions used in the actual pricing of the benefit.
     Mortality assumptions are based on Company experience and are adjusted to
     reflect deviations such as substandard mortality in structured settlement
     benefits. The interest rates range from 2.0% to 9.0% with a weighted
     average of 7.1% for these products. Traditional life products include whole
     life and term insurance. Future policy benefits for traditional life
     products are estimated on the basis of actuarial assumptions as to
     mortality, persistency and interest, established at policy issue. Interest
     assumptions applicable to traditional life products range from 2.5% to
     7.0%, with a weighted average of 3.6%. Assumptions established at policy
     issue as to mortality and persistency are based on the Company's
     experience, which, together with interest assumptions, include a margin for
     adverse deviation. Appropriate recognition has been given to experience
     rating and reinsurance.

                                       32

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     GUARANTY FUND AND OTHER INSURANCE RELATED ASSESSMENTS

     Included in other liabilities is the Company's estimate of its liability
     for guaranty fund and other insurance-related assessments. State guaranty
     fund assessments are based upon the Company's share of premium written or
     received in one or more years prior to an insolvency occurring in the
     industry. Once an insolvency has occurred, the Company recognizes a
     liability for such assessments if it is probable that an assessment will be
     imposed and the amount of the assessment can be reasonably estimated. At
     December 31, 2002 and 2001, the Company had a liability of $22.6 million
     and $22.3 million, respectively, for guaranty fund assessments and a
     related premium tax offset recoverable of $4.2 million and $4.3 million,
     respectively. The assessments are expected to be paid over a period of
     three to five years and the premium tax offsets are expected to be realized
     over a period of 10 to 15 years.

     PERMITTED STATUTORY ACCOUNTING PRACTICES

     The Company's insurance subsidiaries, domiciled principally in Connecticut
     and Massachusetts, prepare statutory financial statements in accordance
     with the accounting practices prescribed or permitted by the insurance
     departments of the states of domicile. Prescribed statutory accounting
     practices are those practices that are incorporated directly or by
     reference in state laws, regulations, and general administrative rules
     applicable to all insurance enterprises domiciled in a particular state.
     Permitted statutory accounting practices include practices not prescribed
     by the domiciliary state, but allowed by the domiciliary state regulatory
     authority. The Company does not have any permitted statutory accounting
     practices.

     PREMIUMS

     Premiums are recognized as revenue when due. Premiums for contracts with a
     limited number of premium payments, due over a significantly shorter period
     than the period over which benefits are provided, are considered income
     when due. The portion of premium which is not required to provide for
     benefits and expenses is deferred and recognized in income in a constant
     relationship to insurance benefits in force.

     FEE INCOME

     Fee income is recognized on deferred annuity and universal life contracts
     for mortality, administrative and equity protection charges according to
     contract due dates. Fee income is recognized on variable annuity and
     universal life separate accounts either daily, monthly, quarterly or
     annually as per contract terms.

     OTHER REVENUES

     Other revenues include surrender penalties collected at the time of a
     contract surrender, and other miscellaneous charges related to annuity and
     universal life contracts recognized when received. Also included are
     revenues from unconsolidated non-insurance subsidiaries. Amortization of
     deferred income related to reinsured blocks of business are recognized in
     relation to anticipated premiums and are reported in other revenues.

     CURRENT AND FUTURE INSURANCE BENEFITS

     Current and future insurance benefits represent charges for mortality and
     morbidity related to fixed annuities, universal life, term life and health
     insurance benefits.

                                       33

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     INTEREST CREDITED TO CONTRACTHOLDERS

     Interest credited to contractholders represents amounts earned by universal
     life, COLI, pension investment, GICs and certain deferred annuity contracts
     in accordance with contract provisions.

     FEDERAL INCOME TAXES

     The provision for federal income taxes is comprised of two components,
     current income taxes and deferred income taxes. Deferred federal income
     taxes arise from changes during the year in cumulative temporary
     differences between the tax basis and book basis of assets and liabilities.

     STOCK-BASED COMPENSATION

     Prior to January 1, 2003, the Company applied Accounting Principles Board
     Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and
     related interpretations in accounting for its stock-based compensation
     plans. Under APB 25, there is generally no charge to earnings for employee
     stock option awards because the options granted under these plans have an
     exercise price equal to the market value of the underlying common stock on
     the grant date. Alternatively, FAS No. 123, "Accounting for Stock-Based
     Compensation" (FAS 123), allows companies to recognize compensation expense
     over the related service period based on the grant date fair value of the
     stock award.

2.   BUSINESS DISPOSITION

     Effective July 1, 2000, the Company sold 90% of its individual long-term
     care insurance business to General Electric Capital Assurance Company and
     its subsidiary in the form of indemnity reinsurance arrangements. The
     proceeds were $410 million, resulting in a deferred gain of approximately
     $150 million after-tax. The deferred gain is amortized in relation to
     anticipated premiums. After-tax amortization amounted to $20 million, $21
     million and $5 million in 2002, 2001 and 2000, respectively. Earned
     premiums were $24 million, $25 million and $138 million in 2002, 2001 and
     2000, respectively.

3.   OPERATING SEGMENTS

     The Company has two reportable business segments that are separately
     managed due to differences in products, services, marketing strategy and
     resource management. The business of each segment is maintained and
     reported through separate legal entities within the Company. The management
     groups of each segment report separately to the common ultimate parent,
     Citigroup Inc.

     TRAVELERS LIFE & ANNUITY (TLA) core offerings include individual annuity,
     individual life, COLI and group annuity insurance products distributed by
     TIC and TLAC principally under the Travelers Life & Annuity name. Among the
     range of individual products offered are fixed and variable deferred
     annuities, payout annuities and term, universal and variable life
     insurance. The COLI product is a variable universal life product
     distributed through independent specialty brokers. The group products
     include institutional pensions, including GICs, payout annuities, group
     annuities sold to employer-sponsored retirement and savings plans and
     structured finance transactions. The majority of the annuity business and a
     substantial portion of the life business written by TLA are accounted for
     as investment contracts,

                                       34

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     with the result that the deposits collected are reported as liabilities and
     are not included in revenues.

     The PRIMERICA LIFE INSURANCE business segment consolidates the business of
     Primerica Life, Primerica Life Insurance Company of Canada, CitiLife and
     NBL. The Primerica Life Insurance business segment offers individual life
     products, primarily term insurance, to customers through a sales force of
     approximately 107,000 representatives. A great majority of the domestic
     licensed sales force works on a part-time basis.

     The accounting policies of the segments are the same as those described in
     the summary of significant accounting policies (see Note 1), except that
     management also includes receipts on long-duration contracts (universal
     life-type and investment contracts) as deposits along with premiums in
     measuring business volume. The amount of investments in equity method
     investees and total expenditures for additions to long- lived assets other
     than financial instruments, long-term customer relationships of a financial
     institution, mortgage and other servicing rights, and deferred tax assets,
     were not material.

                                       35

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION:
-------------------------------------------------------------------------------------------------------------------------
AT AND FOR THE YEAR
ENDED DECEMBER 31, 2002                                                      TRAVELERS LIFE   PRIMERICA LIFE
 ($ in millions)                                                               & ANNUITY        INSURANCE          TOTAL
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>                 <C>
Business Volume:
     Premiums                                                                   $   730          $ 1,194          $ 1,924
     Deposits                                                                    11,906                -           11,906
                                                                                -------          -------          -------
Total business volume                                                           $12,636          $ 1,194          $13,830
Net investment income                                                             2,646              290            2,936
Interest credited to contractholders                                              1,220                -            1,220
Amortization of deferred acquisition costs                                          174              219              393
Total expenditures for deferred acquisition costs                                   556              323              879
Federal income taxes (FIT) on operating income                                      325              209              534
Operating income (excludes realized gains or
      losses and the related FIT)                                               $   884          $   407          $ 1,291
Segment Assets                                                                  $74,562          $ 8,433          $82,995
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION:
-------------------------------------------------------------------------------------------------------------------------
AT AND FOR THE YEAR
ENDED DECEMBER 31, 2001                                                      TRAVELERS LIFE   PRIMERICA LIFE
($ in millions)                                                                & ANNUITY        INSURANCE          TOTAL
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>                 <C>
Business Volume:
     Premiums                                                                   $   957          $ 1,145          $ 2,102
     Deposits                                                                    13,067                -           13,067
                                                                                -------          -------          -------
Total business volume                                                           $14,024          $ 1,145          $15,169
Net investment income                                                             2,530              301            2,831
Interest credited to contractholders                                              1,179                -            1,179
Amortization of deferred acquisition costs                                          171              208              379
Total expenditures for deferred acquisition costs                                   553              298              851
Federal income taxes (FIT) on operating income                                      377              209              586
Operating income (excludes realized gains or
      losses and the related FIT)                                               $   801          $   399          $ 1,200
Segment Assets                                                                  $69,836          $ 8,030          $77,866
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       36

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
AT AND FOR THE YEAR
ENDED DECEMBER 31, 2000                                                      TRAVELERS LIFE   PRIMERICA LIFE
($ in millions)                                                                & ANNUITY        INSURANCE          TOTAL
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>                 <C>
Business Volume:
     Premiums                                                                   $   860          $ 1,106          $ 1,966
     Deposits                                                                    11,536                -           11,536
                                                                                -------          -------          -------
Total business volume                                                           $12,396          $ 1,106          $13,502
Net investment income                                                             2,450              280            2,730
Interest credited to contractholders                                              1,038                -            1,038
Amortization of deferred acquisition costs                                          166              181              347
Total expenditures for deferred acquisition costs                                   520              272              792
Federal income taxes (FIT) on operating income                                      381              197              578
Operating income (excludes realized gains or
     losses and the related FIT)                                                $   777          $   376          $ 1,153
Segment Assets                                                                  $62,771          $ 7,522          $70,293
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       37

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
BUSINESS SEGMENT RECONCILIATION:
($ in millions)                                                                     AT AND FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------------------

BUSINESS VOLUME AND REVENUES                                                            2002          2001          2000
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>           <C>           <C>
Total business volume                                                                 $ 13,830      $ 15,169      $ 13,502
Other revenues, including fee income                                                       696           644           635
Elimination of deposits                                                                (11,906)      (13,067)      (11,536)
                                                                                      ------------------------------------
Revenue from external sources                                                            2,620         2,746         2,601
Net investment income                                                                    2,936         2,831         2,730
Realized investment gains (losses)                                                        (322)          125           (77)
==========================================================================================================================
      Total revenues                                                                  $  5,234      $  5,702      $  5,254
==========================================================================================================================

OPERATING INCOME
--------------------------------------------------------------------------------------------------------------------------
Total operating income of business segments                                           $  1,291      $  1,200      $  1,153
Realized investment gains (losses), net of tax                                            (209)           81           (50)
Cumulative effect of change in accounting for
  derivative instruments and hedging activities, net
  of tax                                                                                     -            (6)            -
Cumulative effect of change in accounting for
  securitized financial assets, net of tax                                                   -            (3)            -
--------------------------------------------------------------------------------------------------------------------------
      Income from continuing operations                                               $  1,082      $  1,272      $  1,103
==========================================================================================================================

ASSETS
--------------------------------------------------------------------------------------------------------------------------
Total assets of business segments                                                     $ 82,995      $ 77,866      $ 70,293
==========================================================================================================================

BUSINESS VOLUME AND REVENUES
--------------------------------------------------------------------------------------------------------------------------
Individual Annuities                                                                  $  6,307      $  7,166      $  7,101
Group Annuities                                                                          7,285         8,383         6,563
Individual Life and Health Insurance and COLI                                            3,116         2,970         2,550
Other (a)                                                                                  432           250           576
Elimination of deposits                                                                (11,906)      (13,067)      (11,536)
--------------------------------------------------------------------------------------------------------------------------
      Total revenue                                                                   $  5,234      $  5,702      $  5,254
==========================================================================================================================
</TABLE>

(a)  Other represents revenue attributable to unallocated capital and run-off
     businesses.

     The Company's revenue was derived almost entirely from U.S. domestic
     business. Revenue attributable to foreign countries was insignificant.

     The Company had no transactions with a single customer representing 10% or
     more of its revenue.

                                       38

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

4.   INVESTMENTS

     FIXED MATURITIES

     The amortized cost and fair value of investments in fixed maturities were
     as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                   GROSS       GROSS
DECEMBER 31, 2002                                                                   AMORTIZED   UNREALIZED   UNREALIZED     FAIR
($ in millions)                                                                       COST         GAINS       LOSSES       VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>         <C>          <C>           <C>
AVAILABLE FOR SALE:
     Mortgage-backed securities - CMOs and
     pass-through securities                                                         $ 6,975      $   434      $     2     $ 7,407
     U.S. Treasury securities and obligations of
     U.S. Government and government agencies and
     authorities                                                                       2,402           39           19       2,422
     Obligations of states, municipalities and
     political subdivisions                                                              297           22            0         319
     Debt securities issued by foreign governments                                       365           30            2         393
     All other corporate bonds                                                        20,894          982          608      21,268
     Other debt securities                                                             4,348          229           66       4,511
     Redeemable preferred stock                                                          147            1           34         114
----------------------------------------------------------------------------------------------------------------------------------
Total Available For Sale                                                             $35,428      $ 1,737      $   731     $36,434
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                   GROSS       GROSS
DECEMBER 31, 2001                                                                   AMORTIZED   UNREALIZED   UNREALIZED     FAIR
($ in millions)                                                                       COST         GAINS       LOSSES       VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>         <C>          <C>           <C>
AVAILABLE FOR SALE:
     Mortgage-backed securities - CMOs and
     pass-through securities                                                         $ 6,654      $   116      $    57     $ 6,713
     U.S. Treasury securities and obligations of
     U.S. Government and government agencies and
     authorities                                                                       1,677            8           63       1,622
     Obligations of states, municipalities and
     political subdivisions                                                              108            4            1         111
     Debt securities issued by foreign governments                                       810           46            5         851
     All other corporate bonds                                                        17,904          482          260      18,126
     Other debt securities                                                             4,406          154           86       4,474
     Redeemable preferred stock                                                          171           12            8         175
----------------------------------------------------------------------------------------------------------------------------------
         Total Available For Sale                                                    $31,730      $   822      $   480     $32,072
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       39

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     Proceeds from sales of fixed maturities classified as available for sale
     were $15.5 billion, $14.1 billion and $10.8 billion in 2002, 2001 and 2000,
     respectively. Gross gains of $741 million, $633 million and $213 million
     and gross losses of $309 million, $273 million and $407 million in 2002,
     2001 and 2000, respectively, were realized on those sales. Additional
     losses of $639 million, $153 million and $25 million in 2002, 2001 and
     2000, respectively, were realized due to other-than-temporary losses in
     value. Impairment activity increased significantly beginning in the fourth
     quarter of 2001 and continued throughout 2002. Impairments were
     concentrated in telecommunication and energy company investments.

     Fair values of investments in fixed maturities are based on quoted market
     prices or dealer quotes or, if these are not available, discounted expected
     cash flows using market rates commensurate with the credit quality and
     maturity of the investment. The fair value of investments for which a
     quoted market price or dealer quote is not available amounted to $5.1
     billion and $4.6 billion at December 31, 2002 and 2001, respectively.

     The amortized cost and fair value of fixed maturities at December 31, 2002,
     by contractual maturity, are shown below. Actual maturities will differ
     from contractual maturities because borrowers may have the right to call or
     prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
                                                          AMORTIZED
($ in millions)                                              COST           FAIR VALUE
--------------------------------------------------------------------------------------
<S>                                                       <C>               <C>
MATURITY:
     Due in one year or less                               $ 2,572           $ 2,605
     Due after 1 year through 5 years                       10,162            10,430
     Due after 5 years through 10 years                      8,591             8,768
     Due after 10 years                                      7,128             7,224
--------------------------------------------------------------------------------------
                                                            28,453            29,027
--------------------------------------------------------------------------------------
     Mortgage-backed securities                              6,975             7,407
--------------------------------------------------------------------------------------
         Total Maturity                                    $35,428           $36,434
--------------------------------------------------------------------------------------
</TABLE>

     The Company makes investments in collateralized mortgage obligations
     (CMOs). CMOs typically have high credit quality, offer good liquidity, and
     provide a significant advantage in yield and total return compared to U.S.
     Treasury securities. The Company's investment strategy is to purchase CMO
     tranches which are protected against prepayment risk, including planned
     amortization class and last cash flow tranches. Prepayment protected
     tranches are preferred because they provide stable cash flows in a variety
     of interest rate scenarios. The Company does invest in other types of CMO
     tranches if a careful assessment indicates a favorable risk/return
     tradeoff. The Company does not purchase residual interests in CMOs.

     At December 31, 2002 and 2001, the Company held CMOs classified as
     available for sale with a fair value of $4.7 billion and $4.5 billion,
     respectively. Approximately 35% and 38%, respectively, of the Company's CMO
     holdings are fully collateralized by GNMA, FNMA or FHLMC securities at
     December 31, 2002 and 2001. In addition, the Company held $2.6 billion and
     $2.1 billion of GNMA, FNMA or FHLMC mortgage-backed pass-through securities
     at December 31, 2002 and 2001, respectively. All of these securities are
     rated AAA.

                                       40

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     The Company engages in securities lending whereby certain securities from
     its portfolio are loaned to other institutions for short periods of time.
     The Company generally receives cash collateral from the borrower, equal to
     at least the market value of the loaned securities plus accrued interest,
     and reinvests it in short-term securities. The loaned securities remain a
     recorded asset of the Company, however, the Company records a liability for
     the amount of the cash collateral held, representing its obligation to
     return the cash collateral related to these loaned securities, and reports
     that liability as part of other liabilities in the consolidated balance
     sheet. At December 31, 2002 and 2001, the Company held cash collateral of
     $2.8 billion and $2.4 billion, respectively.

     EQUITY SECURITIES

     The cost and fair values of investments in equity securities were as
     follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES:                                            GROSS UNREALIZED      GROSS UNREALIZED        FAIR
($ in millions)                                   COST              GAINS                 LOSSES            VALUE
-----------------------------------------------------------------------------------------------------------------
<S>                                               <C>         <C>                   <C>                     <C>
DECEMBER 31, 2002

     Common stocks                                $ 48               $ 9                   $ 7              $ 50
     Non-redeemable preferred stocks               280                 8                     6               282
-----------------------------------------------------------------------------------------------------------------
         Total Equity Securities                  $328               $17                   $13              $332
-----------------------------------------------------------------------------------------------------------------

DECEMBER 31, 2001
     Common stocks                                $ 96               $11                   $ 6              $101
     Non-redeemable preferred stocks               375                 8                    12               371
-----------------------------------------------------------------------------------------------------------------
         Total Equity Securities                  $471               $19                   $18              $472
-----------------------------------------------------------------------------------------------------------------
</TABLE>

     Proceeds from sales of equity securities were $945 million, $112 million
     and $397 million in 2002, 2001 and 2000, respectively. Gross gains of $8
     million, $10 million and $107 million and gross losses of $4 million, $13
     million and $9 million in 2002, 2001 and 2000, respectively, were realized
     on those sales. Additional losses of $19 million, $96 million and $7
     million in 2002, 2001 and 2000, respectively, were realized due to
     other-than-temporary losses in value.

     MORTGAGE LOANS AND REAL ESTATE

     At December 31, 2002 and 2001, the Company's mortgage loan and real estate
     portfolios consisted of the following:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
($ in millions)                                                            2002            2001
------------------------------------------------------------------------------------------------
<S>                                                                       <C>             <C>
Current Mortgage Loans                                                    $1,941          $1,976
Underperforming Mortgage Loans                                                44              19
------------------------------------------------------------------------------------------------
     Total Mortgage Loans                                                  1,985           1,995
------------------------------------------------------------------------------------------------

Real Estate - Foreclosed                                                      17              42
Real Estate - Investment                                                      19              13
------------------------------------------------------------------------------------------------
     Total Real Estate                                                        36              55
------------------------------------------------------------------------------------------------
     Total Mortgage Loans and Real Estate                                 $2,021          $2,050
================================================================================================
</TABLE>

     Underperforming mortgage loans include delinquent mortgage loans over 90
     days past due, loans in the process of foreclosure and loans modified at
     interest rates below market.

                                       41

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     Aggregate annual maturities on mortgage loans at December 31, 2002 are
     shown below. Actual maturities will differ from contractual maturities
     because borrowers may have the right to prepay obligations with or without
     prepayment penalties.

<TABLE>
<CAPTION>
----------------------------------------------------------------
YEAR ENDING DECEMBER 31,
($ in millions)
----------------------------------------------------------------
<S>                                                       <C>
Past Maturity                                             $   13
2003                                                         183
2004                                                         156
2005                                                         123
2006                                                         198
2007                                                         135
Thereafter                                                 1,177
----------------------------------------------------------------
     Total                                                $1,985
================================================================
</TABLE>

     TRADING SECURITIES

     Trading securities of the Company are held in Tribeca Citigroup Investments
     Ltd. The assets and liabilities are valued at fair value as follows:

<TABLE>
<CAPTION>
                                                            Fair value as of         Fair value as of
($ in millions)                                            December 31, 2002        December 31, 2001
---------------                                            -----------------        -----------------
<S>                                                        <C>                      <C>
ASSETS
    Trading securities
       Convertible bond arbitrage                                $1,442                   $1,798
       Merger arbitrage                                              47                       80
       Other                                                         42                        2
                                                                 ------                   ------
                                                                 $1,531                   $1,880
                                                                 ======                   ======

LIABILITIES
    Trading securities sold not yet purchased
       Convertible bond arbitrage                                $  520                   $  836
       Merger arbitrage                                              13                       51
       Other                                                         65                        4
                                                                 ------                   ------
                                                                 $  598                   $  891
                                                                 ======                   ======
</TABLE>

     The Company's trading portfolio investments and related liabilities are
     normally held for periods less than six months. See Note 12.

                                       42

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     OTHER INVESTED ASSETS

     Other invested assets are composed of the following:

<TABLE>
<CAPTION>
------------------------------------------------------------------------
($ in millions)                                     2002           2001
------------------------------------------------------------------------
<S>                                                <C>            <C>
Investment in Citigroup preferred stock            $3,212         $  987
Partnership investments                             1,269            949
Real estate joint ventures                            390            520
Other                                                  38             29
------------------------------------------------------------------------
Total                                              $4,909         $2,485
------------------------------------------------------------------------
</TABLE>

     CONCENTRATIONS

     At December 31, 2002 and 2001, the Company had an investment in Citigroup
     Preferred Stock of $3.2 billion and $987 million, respectively. See Note
     14.

     The Company maintains a short-term investment pool for its insurance
     affiliates in which the Company also participates. See Note 14.

     The Company had concentrations of investments, excluding those in federal
     and government agencies, primarily fixed maturities at fair value, in the
     following industries:

<TABLE>
<CAPTION>
------------------------------------------------------------------------
($ in millions)                                     2002           2001
------------------------------------------------------------------------
<S>                                                <C>            <C>
Electric Utilities                                 $3,979         $3,883
Finance                                             3,681          1,633
Banking                                             1,900          1,944
------------------------------------------------------------------------
</TABLE>

     The Company held investments in foreign banks in the amount of $869 million
     and $954 million at December 31, 2002 and 2001, respectively, which are
     included in the table above. The Company defines its below investment grade
     assets as those securities rated Ba1 by Moody's Investor Services (or its
     equivalent) or below by external rating agencies, or the equivalent by
     internal analysts when a public rating does not exist. Such assets include
     publicly traded below investment grade bonds and certain other privately
     issued bonds and notes that are classified as below investment grade. Below
     investment grade assets included in the categories of the preceding table
     include $878 million and $358 million in Electric Utilities at December 31,
     2002 and 2001, respectively, and total below investment grade assets were
     $3.8 billion and $2.3 billion at December 31, 2002 and 2001, respectively.

     Included in mortgage loans were the following group concentrations:

<TABLE>
<CAPTION>
------------------------------------------------------------------------
($ in millions)                                     2002           2001
------------------------------------------------------------------------
<S>                                                <C>            <C>
STATE
California                                         $  788         $  788

PROPERTY TYPE
Agricultural                                       $1,212         $1,131
</TABLE>

                                       43

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     The Company monitors creditworthiness of counterparties to all financial
     instruments by using controls that include credit approvals, credit limits
     and other monitoring procedures. Collateral for fixed maturities often
     includes pledges of assets, including stock and other assets, guarantees
     and letters of credit. The Company's underwriting standards with respect to
     new mortgage loans generally require loan to value ratios of 75% or less at
     the time of mortgage origination.

     NON-INCOME PRODUCING INVESTMENTS

     Investments included in the consolidated balance sheets that were
     non-income producing amounted to $58.5 million and $27.7 million at
     December 31, 2002 and 2001, respectively.

     RESTRUCTURED INVESTMENTS

     The Company had mortgage loans and debt securities that were restructured
     at below market terms at December 31, 2002 and 2001. The balances of the
     restructured investments were insignificant. The new terms typically defer
     a portion of contract interest payments to varying future periods. Gross
     interest income on restructured assets that would have been recorded in
     accordance with the original terms of such loans was insignificant in 2002
     and 2001. Interest on these assets, included in net investment income, was
     also insignificant in 2002 and 2001.

     NET INVESTMENT INCOME

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in millions)                                                  2002           2001           2000
----------------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>            <C>
GROSS INVESTMENT INCOME
     Fixed maturities                                           $2,359         $2,328         $2,061
     Mortgage loans                                                167            210            223
     Trading                                                         9            131            208
     Joint ventures and partnerships                               203             71            150
     Citigroup preferred stock                                     178             53             53
     Other, including policy loans                                 104            165            184
----------------------------------------------------------------------------------------------------
Total gross investment income                                    3,020          2,958          2,879
----------------------------------------------------------------------------------------------------
Investment expenses                                                 84            127            149
----------------------------------------------------------------------------------------------------
Net investment income                                           $2,936         $2,831         $2,730
----------------------------------------------------------------------------------------------------
</TABLE>

     REALIZED AND UNREALIZED INVESTMENT GAINS (LOSSES)

     Net realized investment gains (losses) for the periods were as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in millions)                                                  2002           2001           2000
----------------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>            <C>
REALIZED INVESTMENT GAINS (LOSSES)
     Fixed maturities                                           $ (207)        $  207         $ (219)
     Equity securities                                             (15)           (99)            91
     Mortgage loans                                                  -              5             27
     Real estate held for sale                                       8              3             25
     Derivatives                                                   (77)            14              -
     Other                                                         (31)            (5)            (1)
----------------------------------------------------------------------------------------------------
          Total realized investment gains (losses)              $( 322)        $  125         $  (77)
----------------------------------------------------------------------------------------------------
</TABLE>

                                       44

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     Changes in net unrealized investment gains (losses) that are reported in
     accumulated other changes in equity from nonowner sources were as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in millions)                                                  2002           2001           2000
----------------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>            <C>
UNREALIZED INVESTMENT GAINS (LOSSES)
     Fixed maturities                                           $  664            $85         $  891
     Equity securities                                               3             40           (132)
     Other                                                          31            (20)            13
----------------------------------------------------------------------------------------------------
         Total unrealized investment gains (losses)                698            105            772
----------------------------------------------------------------------------------------------------
     Related taxes                                                 243             37            271
----------------------------------------------------------------------------------------------------
     Change in unrealized investment gains (losses)                455             68            501
     Balance beginning of year                                     171            103           (398)
----------------------------------------------------------------------------------------------------
         Balance end of year                                    $  626         $  171         $  103
----------------------------------------------------------------------------------------------------
</TABLE>

5.   REINSURANCE

     Reinsurance is used in order to limit losses, minimize exposure to large
     risks, provide additional capacity for future growth and to effect
     business-sharing arrangements. Reinsurance is accomplished through various
     plans of reinsurance, primarily yearly renewable term coinsurance and
     modified coinsurance. Reinsurance involves credit risk and the Company
     monitors the financial condition of these reinsurers on an ongoing basis.
     The Company remains primarily liable as the direct insurer on all risks
     reinsured.

     Since 1997 universal life business has been reinsured under an 80%/20%
     quota share reinsurance program and term life business has been reinsured
     under a 90%/10% quota share reinsurance program. Maximum retention of $2.5
     million is generally reached on policies in excess of $12.5 million for
     universal life, and in excess of $25.0 million for term insurance. For
     other plans of insurance, it is the policy of the Company to obtain
     reinsurance for amounts above certain retention limits on individual life
     policies, which limits vary with age and underwriting classification.
     Generally, the maximum retention on an ordinary life risk is $2.5 million.
     Total in-force business ceded under reinsurance contracts is $321.9 billion
     and $285.7 billion at December 31, 2002 and 2001.

     Effective July 1, 2000 the Company sold 90% of its individual long-term
     care insurance business to General Electric Capital Assurance Company and
     its subsidiary in the form of indemnity reinsurance arrangements. Written
     premiums ceded per these arrangements were $231.8 million and $233.3
     million in 2002 and 2001, respectively, and earned premiums ceded were
     $233.8 million and $240.1 million in 2002 and 2001, respectively.

     The Company also reinsures the guaranteed minimum death benefit (GMDB) on
     its variable annuity product. Total variable annuity account balances with
     GMDB is $19.1 billion, of which $12.4 billion or 65% is reinsured at
     December 31, 2002. GMDB is payable upon the death of a contractholder. When
     the benefit payable is greater than the account value of the variable
     annuity, the difference is called the net amount at risk (NAR). NAR totals
     $4.6 billion at December 31, 2002, of which $3.8 billion or 82% is
     reinsured. During 2002, substantially all new contracts written were not
     reinsured.

     Through TIC, the Company writes workers' compensation business. This
     business is reinsured through a 100% quota-share agreement with the
     insurance subsidiaries of TPC.

                                       45

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)

     A summary of reinsurance financial data reflected within the consolidated
     statements of income and balance sheets is presented below ($ in millions):

<TABLE>
<CAPTION>
                                                                  FOR THE YEARS ENDING DECEMBER 31,
WRITTEN PREMIUMS                                                 2002           2001           2000
----------------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>            <C>
Direct                                                          $2,610         $2,848         $2,634

Assumed from:
     Non-affiliated companies                                        -              1              -

Ceded to:
     Travelers Indemnity Company                                   (83)          (146)          (195)
     Non-affiliated companies                                     (614)          (591)          (465)
----------------------------------------------------------------------------------------------------
Total Net Written Premiums                                      $1,913         $2,112         $1,974
====================================================================================================
</TABLE>

<TABLE>
<CAPTION>
EARNED PREMIUMS                                                  2002           2001           2000
----------------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>            <C>
Direct                                                          $2,652         $2,879         $2,644

Assumed from:
     Non-affiliated companies                                        -              1              -

Ceded to:
     Travelers Indemnity Company                                  (109)          (180)          (216)
     Non-affiliated companies                                     (619)          (598)          (462)
----------------------------------------------------------------------------------------------------
Total Net Earned Premiums                                       $1,924         $2,102         $1,966
====================================================================================================
</TABLE>

     Travelers Indemnity Company was an affiliate in 2001, 2000 and for part of
     2002. See Note 15.

     Reinsurance recoverables at December 31, 2002 and 2001 include amounts
     recoverable on unpaid and paid losses and were as follows ($ in millions):

<TABLE>
<CAPTION>
REINSURANCE RECOVERABLES                                         2002           2001
-------------------------------------------------------------------------------------
<S>                                                             <C>            <C>
Life and Accident and Health Business:
     Non-affiliated companies                                   $2,589         $2,282

Property-Casualty Business:
     Travelers Indemnity Company                                 1,712          1,881
-------------------------------------------------------------------------------------
Total Reinsurance Recoverables                                  $4,301         $4,163
=====================================================================================
</TABLE>

     Reinsurance recoverables for the life and accident and health business
     include $1,351 million and $1,060 million from General Electric Capital
     Assurance Company, and also include $472 million and $500 million, from The
     Metropolitan Life Insurance Company at December 31, 2002 and 2001,
     respectively.

6.   DEFERRED ACQUISITION COSTS AND VALUE OF INSURANCE IN FORCE

     The Company has two intangible, amortizable assets, DAC and the value of
     insurance in force. The following is a summary of capitalized DAC by type.

                                       46

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                        Deferred &
                                         Payout              UL &           Traditional Life
In millions of dollars                  Annuities            COLI              & Other               Total
------------------------------------------------------------------------------------------------------------
<S>                                     <C>                  <C>            <C>                      <C>
Balance December 31, 2000                $  896              $299               $ 1,794               $2,989
                                        --------------------------------------------------------------------

       Deferred expenses
            and other                       385               142                   324                  851
      Amortization expense                 (144)              (11)                 (224)                (379)

                                        --------------------------------------------------------------------
Balance December 31, 2001                 1,137               430                 1,894                3,461

       Deferred expenses
            and other                       348               172                   348                  868
      Amortization expense                 (132)              (24)                 (237)                (393)

                                        --------------------------------------------------------------------
Balance December 31, 2002                $1,353              $578               $ 2,005               $3,936
------------------------------------------------------------------------------------------------------------
</TABLE>

     The value of insurance in force totaled $130 million and $144 million at
     December 31, 2002 and 2001, respectively, and is included in other assets.
     Amortization expense on the value of insurance in force was $25 million and
     $26 million for the twelve months ended December 31, 2002 and 2001,
     respectively. Amortization expense related to the value of insurance in
     force is estimated to be $20 million in 2003, $18 million in 2004, $16
     million in 2005, $13 million in 2006 and $12 million in 2007. In 2002 there
     was an opening balance sheet reclassification between DAC and the value of
     insurance in force in the amount of $11 million. This had no impact on
     results of operations or shareholder's equity.

7.   DEPOSIT FUNDS AND RESERVES

     At December 31, 2002 and 2001, the Company had $38.8 billion and $34.1
     billion of life and annuity deposit funds and reserves, respectively. Of
     that total, $21.8 billion and $19.1 billion is not subject to discretionary
     withdrawal based on contract terms. The remaining $17.0 billion and $15.0
     billion is for life and annuity products that are subject to discretionary
     withdrawal by the contractholder. Included in the amounts that are subject
     to discretionary withdrawal is $5.7 billion and $4.2 billion of liabilities
     that are surrenderable with market value adjustments. Also included are an
     additional $5.5 billion and $5.0 billion of life insurance and individual
     annuity liabilities which are subject to discretionary withdrawals, and
     have an average surrender charge of 4.7% and 4.7%, respectively. In the
     payout phase, these funds are credited at significantly reduced interest
     rates. The remaining $5.8 billion and $5.8 billion of liabilities are
     surrenderable without charge. Approximately 10.0% and 10.2% of these relate
     to individual life products for 2002 and 2001, respectively. These risks
     would have to be underwritten again if transferred to another carrier,
     which is considered a significant deterrent against withdrawal by long-term
     policyholders. Insurance liabilities that are surrendered or withdrawn are
     reduced by outstanding policy loans and related accrued interest prior to
     payout.

     Included in contractholder funds and in the preceding paragraph are GICs
     totaling $10.9 billion. The scheduled maturities for these GICs, including
     interest, are $4.5 billion, $1.5 billion, $1.3 billion, $1.4 billion and
     $4.0 billion in 2003, 2004, 2005, 2006 and thereafter. These GICs have a
     weighted average interest rate of 4.81% at December 31, 2002.

                                       47

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

8.   FEDERAL INCOME TAXES

          EFFECTIVE TAX RATE

<TABLE>
<CAPTION>
($ in millions)
----------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,                                 2002           2001            2000
----------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>             <C>
Income before federal income taxes                             $1,503         $1,911          $1,654
Statutory tax rate                                                 35%            35%             35%
----------------------------------------------------------------------------------------------------
Expected federal income taxes                                     526            669             579
Tax effect of:
     Non-taxable investment income                                (62)           (20)            (19)
     Tax reserve release                                          (43)           (18)            (12)
     Other, net                                                     -            (1)               3
----------------------------------------------------------------------------------------------------
Federal income taxes                                           $  421         $  630          $  551
====================================================================================================
Effective tax rate                                                 28%            33%             33%
----------------------------------------------------------------------------------------------------

COMPOSITION OF FEDERAL INCOME TAXES
Current:
     United States                                             $  217         $  424          $  429
     Foreign                                                       19             47              33
----------------------------------------------------------------------------------------------------
     Total                                                        236            471             462
----------------------------------------------------------------------------------------------------
Deferred:
     United States                                                182            166              96
     Foreign                                                        3             (7)             (7)
----------------------------------------------------------------------------------------------------
     Total                                                        185            159              89
----------------------------------------------------------------------------------------------------
Federal income taxes                                           $  421         $  630          $  551
====================================================================================================
</TABLE>

     Additional tax benefits (expense) attributable to employee stock plans
     allocated directly to shareholder's equity for the years ended December 31,
     2002, 2001 and 2000 were $(17) million, $21 million and $24 million,
     respectively.

                                       48

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     The net deferred tax liabilities at December 31, 2002 and 2001 were
     comprised of the tax effects of temporary differences related to the
     following assets and liabilities:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
($ in millions)                                                                         2002              2001
---------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>               <C>
Deferred Tax Assets:
     Benefit, reinsurance and other reserves                                          $    422          $   539
     Operating lease reserves                                                               57               62
     Employee benefits                                                                     199              104
     Other                                                                                 289              158
---------------------------------------------------------------------------------------------------------------
         Total                                                                             967              863
---------------------------------------------------------------------------------------------------------------

Deferred Tax Liabilities:
     Deferred acquisition costs and value of insurance in force                         (1,097)            (968)
     Investments, net                                                                   (1,180)            (215)
     Other                                                                                (138)             (89)
---------------------------------------------------------------------------------------------------------------
         Total                                                                          (2,415)          (1,272)
---------------------------------------------------------------------------------------------------------------
Net Deferred Tax Liability                                                            $ (1,448)         $  (409)
---------------------------------------------------------------------------------------------------------------
</TABLE>

     The Company and its subsidiaries file a consolidated federal income tax
     return with Citigroup Inc. Federal income taxes are allocated to each
     member of the consolidated group, according to the Tax Sharing Agreement,
     on a separate return basis adjusted for credits and other amounts required
     by the Agreement.

     At December 31, 2002 and 2001, the Company had no ordinary or capital loss
     carryforwards.

     The policyholders' surplus account, which arose under prior tax law, is
     generally that portion of the gain from operations that has not been
     subjected to tax, plus certain deductions. The balance of this account is
     approximately $932 million. Income taxes are not provided for on this
     amount because under current U.S. tax rules such taxes will become payable
     only to the extent such amounts are distributed as a dividend or exceed
     limits prescribed by federal law. Distributions are not currently
     contemplated from this account. At current rates the maximum amount of such
     tax would be approximately $326 million.

                                       49

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

9.   SHAREHOLDER'S EQUITY

     Shareholder's Equity and Dividend Availability

     The Company's statutory net income, which includes the statutory net income
     of all insurance subsidiaries, was $256 million, $330 million and $981
     million for the years ended December 31, 2002, 2001 and 2000, respectively.
     The Company's statutory capital and surplus was $6.9 billion and $5.1
     billion at December 31, 2002 and 2001, respectively.

     Effective January 1, 2001, the Company began preparing its statutory basis
     financial statements in accordance with the National Association of
     Insurance Commissioners' Accounting Practices and Procedures Manual -
     version effective January 1, 2001, subject to any deviations prescribed or
     permitted by its domicilary insurance commissioners (see Note 1, Summary of
     Significant Accounting Policies, Permitted Statutory Accounting Practices).
     The impact of this change on statutory capital and surplus was not
     significant. The impact of this change on the Company's statutory net
     income was $119 million in 2001, related to recording equity method
     investment earnings as unrealized gains versus net investment income.

     The Company is currently subject to various regulatory restrictions that
     limit the maximum amount of dividends available to be paid to its parent
     without prior approval of insurance regulatory authorities. A maximum of
     $966 million is available by the end of the year 2003 for such dividends
     without prior approval of the State of Connecticut Insurance Department,
     depending upon the amount and timing of the payments. TLAC may not pay a
     dividend to TIC without such approval. Primerica Life may pay up to $148
     million to TIC in 2003 without prior approval of the Massachusetts
     Insurance Department. The Company paid dividends of $586 million, $472
     million and $860 million in 2002, 2001 and 2000, respectively.

     In connection with the TPC IPO and distribution, the Company's additional
     paid-in capital increased $1,596 million during 2002 as follows:

<TABLE>
<CAPTION>
($ in millions)
---------------
<S>                                                       <C>
Citigroup Series YYY Preferred Stock                      $2,225
TLA Holdings LLC                                             142
Cash and other assets                                        189
Pension, post-retirement, and post-
      employment benefits payable                           (279)
Deferred tax assets                                           98
Deferred tax liabilities                                    (779)
                                                          ------
                                                          $1,596
                                                          ======
</TABLE>

See Note 15.
                                       50

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

9.  SHAREHOLDER'S EQUITY (CONTINUED)

     Accumulated Other Changes in Equity from Nonowner Sources, Net of Tax

     Changes in each component of Accumulated Other Changes in Equity from
     Nonowner Sources were as follows:

<TABLE>
<CAPTION>
                                                   NET UNREALIZED                                              ACCUMULATED OTHER
                                                   GAIN (LOSS) ON    FOREIGN CURRENCY        DERIVATIVE        CHANGES IN EQUITY
                                                    INVESTMENT         TRANSLATION         INSTRUMENTS AND       FROM NONOWNER
($ in millions)                                     SECURITIES         ADJUSTMENTS       HEDGING ACTIVITIES         SOURCES
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>               <C>                 <C>                   <C>
BALANCE, DECEMBER 31, 1999                             $(397)             $   (1)              $    -               $  (398)
Unrealized gains on investment securities,
   net of tax of $297                                    451                   -                    -                   451
Reclassification adjustment for losses
   included in net income, net of tax of $(27)            50                   -                    -                    50
Foreign currency translation adjustment, net
   of tax of $1                                            -                   1                    -                     1
--------------------------------------------------------------------------------------------------------------------------------
PERIOD CHANGE                                            501                   1                    -                   502
--------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2000                               104                   -                    -                   104
Cumulative effect of change in accounting
   for derivative instruments and hedging
   activities, net of tax of $(16)                        14                   -                  (43)                  (29)
Unrealized gains on investment securities,
   net of tax of $80                                     149                   -                    -                   149
Reclassification adjustment for gains
   included in net income, net of tax of $44             (81)                  -                    -                   (81)
Foreign currency translation adjustment, net
   of tax of $(2)                                          -                  (3)                   -                    (3)
Derivative instrument hedging activity
   losses, net of tax of $(35)                             -                   -                  (66)                  (66)
--------------------------------------------------------------------------------------------------------------------------------
PERIOD CHANGE                                             82                  (3)                (109)                  (30)
--------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001                               186                  (3)                (109)                   74
Unrealized gains on investment securities,
   net of tax of $132                                    246                   -                    -                   246
Reclassification adjustment for losses
   included in net income, net of tax of $(113)          209                   -                    -                   209
Foreign currency translation adjustment, net
   of tax of $2                                            -                   3                    -                     3
Derivative instrument hedging activity losses,
  net of tax of $(42)                                      -                   -                 (78)                   (78)
--------------------------------------------------------------------------------------------------------------------------------
PERIOD CHANGE                                            455                   3                 (78)                   380
--------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002                             $ 641              $    -                (187)                $  454
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       51

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

10.  BENEFIT PLANS

     Pension and Other Postretirement Benefits

     The Company participates in a qualified, noncontributory defined benefit
     pension plan sponsored by Citigroup. The Company's share of the expense
     related to this plan was insignificant in 2002, 2001 and 2000.

     The Company also participates in a non-qualified, noncontributory defined
     benefit pension plan sponsored by Citigroup. During 2002, the Company
     assumed TPC's share of the non-qualified pension plan related to inactive
     employees of the former Travelers Insurance entities as part of the TPC
     spin-off. The Company's share of net expense for this plan was $10 million
     in 2002, and insignificant in 2001 and 2000.

     In addition, the Company provides certain other postretirement benefits to
     retired employees through a plan sponsored by Citigroup. The Company
     assumed TPC's share of the postretirement benefits related to inactive
     employees of the former Travelers Insurance entities during 2002 as part of
     the TPC spin-off. The Company's share of net expense for the other
     postretirement benefit plans was $18 million in 2002 and not significant
     for 2001 and 2000.

     401(k) Savings Plan

     Substantially all of the Company's employees are eligible to participate in
     a 401(k) savings plan sponsored by Citigroup. The Company's expenses in
     connection with the 401(k) savings plan were not significant in 2002, 2001
     and 2000. See Note 14.

11.  LEASES

     Most leasing functions for the Company are administered by a Citigroup
     subsidiary at December 31, 2002. Net rent expense for the Company was $24
     million, $26 million, and $26 million in 2002, 2001 and 2000, respectively.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
YEAR ENDING DECEMBER 31,                        MINIMUM OPERATING              MINIMUM CAPITAL
($ in millions)                                  RENTAL PAYMENTS               RENTAL PAYMENTS
----------------------------------------------------------------------------------------------
<S>                                             <C>                            <C>
       2003                                          $ 43                           $ 5
       2004                                            42                             5
       2005                                            47                             5
       2006                                            54                             5
       2007                                            54                             6
       Thereafter                                     131                            24
----------------------------------------------------------------------------------------------
Total Rental Payments                                 $371                           $50
==============================================================================================
</TABLE>

     Future sublease rental income of approximately $66 million will partially
     offset these commitments. Also, the Company will be reimbursed for 50% of
     the rental expense for a particular lease, totaling $164 million, by an
     affiliate.

                                       52

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

12.  DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

     Derivative Financial Instruments

     The Company uses derivative financial instruments, including financial
     futures contracts, swaps, options and forward contracts, as a means of
     hedging exposure to interest rate changes, equity price changes and foreign
     currency risk. The Company also uses derivative financial instruments to
     enhance portfolio income and replicate cash market investments. The
     Company, through Tribeca Citigroup Investments Ltd., holds and issues
     derivative instruments in conjunction with these funding strategies.

     The Company uses exchange traded financial futures contracts to manage its
     exposure to changes in interest rates that arise from the sale of certain
     insurance and investment products, or the need to reinvest proceeds from
     the sale or maturity of investments. To hedge against adverse changes in
     interest rates, the Company enters long or short positions in financial
     futures contracts, which offset asset price changes resulting from changes
     in market interest rates until an investment is purchased, or a product is
     sold. Futures contracts are commitments to buy or sell at a future date a
     financial instrument, at a contracted price, and may be settled in cash or
     through delivery.

     The Company uses equity option contracts to manage its exposure to changes
     in equity market prices that arise from the sale of certain insurance
     products. To hedge against adverse changes in the equity market prices, the
     Company enters long positions in equity option contracts with major
     financial institutions. These contracts allow the Company, for a fee, the
     right to receive a payment if the Standard and Poor's 500 Index falls below
     agreed upon strike prices.

     Currency option contracts are used on an ongoing basis to hedge the
     Company's exposure to foreign currency exchange rates that result from the
     Company's direct foreign currency investments. To hedge against adverse
     changes in exchange rates, the Company enters contracts that give it the
     right, but not the obligation, to sell the foreign currency within a
     limited time at a contracted price that may also be settled in cash, based
     on differentials in the foreign exchange rate. These contracts cannot be
     settled prior to maturity.

     The Company enters into interest rate swaps in connection with other
     financial instruments to provide greater risk diversification and better
     match assets and liabilities. Under interest rate swaps, the Company agrees
     with other parties to exchange, at specified intervals, the difference
     between fixed rate and floating rate interest amounts calculated by
     reference to an agreed upon notional principal amount. The Company also
     enters into basis swaps in which both legs of the swap are floating with
     each based on a different index. Generally, no cash is exchanged at the
     outset of the contract and no principal payments are made by either party.
     A single net payment is usually made by one counterparty at each due date.

     The Company enters into currency swaps in connection with other financial
     instruments to provide greater risk diversification and better match assets
     purchased in U.S. Dollars with a corresponding liability originated in a
     foreign currency. Under currency swaps, the Company agrees with other
     parties to exchange, at specified intervals, foreign currency for U.S.
     Dollars. Generally, there is an exchange of foreign currency for U.S.
     Dollars at the outset of the contract based upon prevailing foreign
     exchange rates. Swap agreements are not exchange traded so they are subject
     to the risk of default by the counterparty.

                                       53

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     Forward contracts are used on an ongoing basis to hedge the Company's
     exposure to foreign currency exchange rates that result from the net
     investment in the Company's Canadian Operations as well as direct foreign
     currency investments. To hedge against adverse changes in exchange rates,
     the Company enters into contracts to exchange foreign currency for U.S.
     Dollars with major financial institutions. These contracts cannot be
     settled prior to maturity. At the maturity date the Company must purchase
     the foreign currency necessary to settle the contracts.

     The Company enters into credit default swaps in conjunction with a fixed
     income investment to reproduce the investment characteristics of a
     different permissible investment. Under credit default swaps, the Company
     agrees with other parties to receive, at specified intervals, fixed or
     floating rate interest amounts calculated by reference to an agreed
     notional principal amount in exchange for the credit default risk of a
     specified bond. Swap agreements are not exchange traded so they are subject
     to the risk of default by the counterparty.

     The Company monitors the creditworthiness of counterparties to these
     financial instruments by using criteria of acceptable risk that are
     consistent with on-balance sheet financial instruments. The controls
     include credit approvals, credit limits and other monitoring procedures.

     The following table summarizes certain information related to the Company's
     hedging activities for the years ended December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                            Year Ended             Year Ended
In millions of dollars                   December 31, 2002      December 31, 2001
--------------------------------------   -----------------      -----------------
<S>                                      <C>                    <C>
Hedge ineffectiveness recognized
    related to fair value hedges           $    (18.3)             $    (4.1)

Hedge ineffectiveness recognized
    related to cash flow hedges                  14.8                   (6.2)

Net gain recorded in accumulated
    other changes in equity from
    nonowner sources related to net
    investment hedges                            (8.4)                   0.8
</TABLE>

     During the year ended December 31, 2002 the Company recorded a gain of $.3
     million from discontinued forecasted transactions. During the year ended
     December 31, 2001 there were no discontinued forecasted transactions. The
     amount expected to be reclassified from accumulated other changes in equity
     from nonowner sources into pre-tax earnings within twelve months from
     December 31, 2002 is $(27.2) million.

     In 2000, these derivative financial instruments were treated as off-balance
     sheet instruments. Financial instruments with off-balance sheet risk
     involve, to varying degrees, elements of credit and market risk in excess
     of the amount recognized in the balance sheet. The contract or notional
     amounts of these instruments reflect the extent of involvement the Company
     has in a particular class of financial instrument. However, the maximum
     loss of cash flow associated with these instruments can be less than these
     amounts. For swaps, options and forward contracts, credit risk is limited
     to the amount that it would cost the Company to replace the contracts.
     Financial futures contracts and purchased listed option contracts have very
     little credit risk since organized exchanges are the counterparties.

                                       54

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     Financial Instruments with Off-Balance Sheet Risk

     In the normal course of business, the Company issues fixed and variable
     rate loan commitments and has unfunded commitments to partnerships. All of
     these commitments are to unaffiliated entities. The off-balance sheet risk
     of fixed and variable rate loan commitments was $240.9 million and $212.2
     million at December 31, 2002 and 2001, respectively. The Company had
     unfunded commitments of $630.0 million and $661.5 million to these
     partnerships at December 31, 2002 and 2001, respectively.

     Fair Value of Certain Financial Instruments

     The Company uses various financial instruments in the normal course of its
     business. Certain insurance contracts are excluded by Statement of
     Financial Accounting Standards No. 107, "Disclosure about Fair Value of
     Financial Instruments," and therefore are not included in the amounts
     discussed.

     At December 31, 2002 and 2001, investments in fixed maturities had a
     carrying value and a fair value of $36.4 billion and $32.1 billion,
     respectively. See Notes 1 and 4.

     At December 31, 2002, mortgage loans had a carrying value of $2.0 billion
     and a fair value of $2.2 billion and at year-end 2001 had a carrying value
     of $2.0 billion and a fair value of $2.1 billion. In estimating fair value,
     the Company used interest rates reflecting the current real estate
     financing market.

     Included in other invested assets are 2,225 shares of Citigroup Cumulative
     Preferred Stock Series YYY, carried at cost of $2,225 million at December
     31, 2002, acquired as a contribution from TPC. This Series YYY preferred
     stock pays cumulative dividends at 6.767%, has a liquidation value of $1
     million per share and has perpetual duration, is not subject to a sinking
     fund or mandatory redemption but may be optionally redeemed by Citigroup at
     any time on or after February 27, 2022. Dividends totaling $125 million
     were received in 2002. There is no established market for this investment
     and it is not practicable to estimate the fair value of the preferred
     stock.

     Included in other invested assets are 987 shares of Citigroup Cumulative
     Preferred Stock Series YY, carried at cost of $987 million at December 31,
     2002 and 2001. This series YY preferred stock pays cumulative dividends at
     5.321%, has a liquidation value of $1 million per share, and has perpetual
     duration, is not subject to a sinking fund or mandatory redemption but may
     be optionally redeemed by Citigroup at any time on or after December 22,
     2018. Dividends totaling $53 million were received during 2002, 2001 and
     2000, respectively. There is no established market for this investment and
     it is not practicable to estimate the fair value of the preferred stock.

     At December 31, 2002, contractholder funds with defined maturities had a
     carrying value of $12.5 billion and a fair value of $13.3 billion, compared
     with a carrying value and a fair value of $9.5 billion and $10.0 billion at
     December 31, 2001. The fair value of these contracts is determined by
     discounting expected cash flows at an interest rate commensurate with the
     Company's credit risk and the expected timing of cash flows. Contractholder
     funds without defined maturities had a carrying value of $11.1 billion and
     a fair value of $10.7 billion at December 31, 2002, compared with a
     carrying value of $10.6 billion and a fair value of $10.3 billion at
     December 31, 2001. These contracts generally are valued at surrender value.

     The carrying values of $321 million and $495 million of financial
     instruments classified as other assets approximated their fair values at
     December 31, 2002 and 2001, respectively. The carrying value of $1.5
     billion of financial instruments classified as other liabilities at both
     December 31, 2002 and 2001 also approximated their fair values at both
     December 31, 2002 and 2001. Fair value is determined using various methods,
     including discounted cash flows, as appropriate for the various financial
     instruments.

                                       55

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     The assets of separate accounts providing a guaranteed return had a
     carrying value and a fair value of $511 million at December 31, 2002,
     compared with a carrying value and a fair value of $507 million at December
     31, 2001. The liabilities of separate accounts providing a guaranteed
     return had a carrying value and a fair value of $511 million at December
     31, 2002, compared with a carrying value and a fair value of $507 million
     at December 31, 2001.

     The carrying values of cash, trading securities and trading securities sold
     not yet purchased are carried at fair value. The carrying values of
     short-term securities and investment income accrued approximated their fair
     values. The carrying value of policy loans, which have no defined
     maturities, is considered to be fair value.

13.  COMMITMENTS AND CONTINGENCIES

     Litigation

     TIC and its subsidiaries are defendants or co-defendants in various
     litigation matters in the normal course of business. These include civil
     actions, arbitration proceedings and other matters arising in the normal
     course of business out of activities as an insurance company, a broker and
     dealer in securities or otherwise. In the opinion of the Company's
     management, the ultimate resolution of these legal proceedings would not be
     likely to have a material adverse effect on the Company's results of
     operations, financial condition or liquidity.

14.  RELATED PARTY TRANSACTIONS

     Citigroup and certain of its subsidiaries provide investment management and
     accounting services, payroll, internal auditing, benefit management and
     administration, property management and investment technology services to
     the Company as of December 31, 2002. At December 31, 2001 the majority of
     these services were provided by either Citigroup and its subsidiaries or
     TPC. The Company paid Citigroup and its subsidiaries $56.9 million and
     $43.6 million in 2002 and 2001, respectively, for these services. The
     Company paid TPC $33.6 million and $30.0 million in 2002 and 2001,
     respectively, for these services. The amounts due from affiliates related
     to these services, included in other assets at December 31, 2002, were
     insignificant and in 2001 were $88.2 million. See Note 15.

     The Company maintains a short-term investment pool in which its insurance
     affiliates participate. The position of each company participating in the
     pool is calculated and adjusted daily. At December 31, 2002 and 2001, the
     pool totaled approximately $4.2 billion and $5.6 billion, respectively. The
     Company's share of the pool amounted to $3.8 billion and $2.6 billion at
     December 31, 2002 and 2001, respectively, and is included in short-term
     securities in the consolidated balance sheets.

                                       56

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     At December 31, 2002 and 2001 the Company had outstanding loaned securities
     to SSB for $267.1 million and $413.5 million, respectively.

     Included in other invested assets is a $3.2 billion and $987 million
     investment in Citigroup preferred stock at December 31, 2002 and 2001,
     respectively, carried at cost. Dividends received on these investments were
     $178 million in 2002, and $53 million in each of 2001 and 2000.

     The Company had investments in an affiliated joint venture, Tishman Speyer,
     in the amount of $186.1 million and $310.9 million at December 31, 2002 and
     2001, respectively. Income of $99.7 million, $65.5 million and $67.0
     million was earned on these investments in 2002, 2001 and 2000,
     respectively.

     The Company also had an investment in Greenwich Street Capital Partners I,
     an affiliated private equity investment, in the amount of $21.6 million at
     both December 31, 2002 and 2001. Income (loss) of $0, $(41.6) million and
     $8.1 million were earned on this investment in 2002, 2001 and 2000,
     respectively.

     In the ordinary course of business, the Company purchases and sells
     securities through affiliated broker-dealers. These transactions are
     conducted on an arm's-length basis.

     The Company markets deferred annuity products and life insurance through
     its affiliate, Salomon Smith Barney (SSB). Annuity deposits related to
     these products were $1.0 billion, $1.5 billion, and $1.8 billion in 2002,
     2001 and 2000, respectively. Life premiums were $109.7 million, $96.5
     million and $77.0 million in 2002, 2001 and 2000, respectively.

     The Company also markets individual annuity and life insurance through
     CitiStreet Retirement Services LLC, a division of CitiStreet, a joint
     venture between Citigroup and State Street Bank. Deposits received from
     CitiStreet Retirement Services, LLC were $1.6 billion in each of 2002, 2001
     and $1.8 billion in 2000.

     The Company markets individual annuity products through an affiliate
     Citibank, N.A. (Citibank). Deposits received from Citibank were $303
     million, $564 million and $392 million in 2002, 2001 and 2000,
     respectively.

     Primerica Financial Services (PFS), an affiliate, is a distributor of
     products for TLA. PFS sold $787 million, $901 million and $1.03 billion of
     individual annuities in 2002, 2001 and 2000, respectively.

     Primerica Life has entered into a General Agency Agreement with PFS, that
     provides that PFS will be Primerica Life's general agent for marketing all
     insurance of Primerica Life. In consideration of such services, Primerica
     Life agreed to pay PFS marketing fees of no less than $10 million per year
     based upon U.S. gross direct premiums received by Primerica Life. In each
     of 2002, 2001, and 2000 the fees paid by Primerica Life were $12.5 million.

     The Company sells structured settlement annuities to the property casualty
     subsidiaries of TPC. See Note 15.

                                       57

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     The Company participates in a stock option plan sponsored by Citigroup that
     provides for the granting of stock options in Citigroup common stock to
     officers and other employees. To further encourage employee stock
     ownership, Citigroup introduced the WealthBuilder stock option program
     during 1997 and the Citigroup Ownership Program in 2001. Under these
     programs, all employees meeting established requirements have been granted
     Citigroup stock options. During 2000 and 2001, Citigroup introduced the
     Citigroup 2000 Stock Purchase Plan and Citigroup 2001 Stock Purchase
     Program for new employees, which allowed eligible employees of Citigroup,
     including the Company's employees, to enter into fixed subscription
     agreements to purchase shares at the market value on the date of the
     agreements. Enrolled employees are permitted to make one purchase prior to
     the expiration date. The Company's charge to income for these plans was
     insignificant in 2002, 2001 and 2000.

     The Company also participates in the Citigroup Capital Accumulation
     Program. Participating officers and other employees receive a restricted
     stock award in the form of Citigroup common stock. These restricted stock
     awards generally vest after a three-year period and, except under limited
     circumstances, the stock can not be sold or transferred during the
     restricted period by the participant, who is required to render service to
     the Company during the restricted period. The Company's charge to income
     for this program was insignificant in 2002, 2001 and 2000.

     Unearned compensation expense associated with the Citigroup restricted
     common stock grants, which represents the market value of Citigroup's
     common stock at the date of grant, is included with other assets in the
     Consolidated Balance Sheet and is recognized as a charge to income ratably
     over the vesting period. The Company's charge to income was insignificant
     during 2002, 2001 and 2000.

     The Company applies Accounting Principles Board Opinion No. 25 (APB 25) and
     related interpretations in accounting for stock options. Since stock
     options under the Citigroup plans are issued at fair market value on the
     date of award, no compensation cost has been recognized for these awards.
     FAS 123 provides an alternative to APB 25 whereby fair values may be
     ascribed to options using a valuation model and amortized to compensation
     cost over the vesting period of the options.

                                       58

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

15.  TRAVELERS PROPERTY CASUALTY SPIN-OFF

     On March 27, 2002, Travelers Property Casualty Corp. (TPC), the Company's
     parent at December 31, 2001, completed its initial public offering (IPO).
     On August 20, 2002, Citigroup made a tax-free distribution to its
     stockholders of a majority portion of its remaining interest in TPC. Prior
     to the IPO the following transactions occurred:

         -    The common stock of the Company was distributed by TPC to CIHC so
              the Company would remain an indirect wholly owned subsidiary of
              Citigroup.

         -    The Company sold its home office buildings in Hartford,
              Connecticut and a building housing TPC's information systems in
              Norcross, Georgia to TPC for $68 million.

         -    TLA Holdings LLC, a non-insurance subsidiary valued at $142
              million, was contributed to the Company by TPC.

         -    The Company assumed pension, post-retirement and post-employment
              benefits payable to all inactive employees of the former Travelers
              Insurance entities and received $189 million of cash and other
              assets from TPC to offset these benefit liabilities.

         -    The Company received 2,225 shares of Citigroup's 6.767% Cumulative
              Preferred Stock, Series YYY, with a par value of $1.00 per share
              and a liquidation value of $1 million per share as a contribution
              from TPC.

     At December 31, 2001, TPC and its subsidiaries were affiliates of the
     Company and provided certain services to the Company. These services
     included data processing, facilities management, banking and financial
     functions, benefits administration and others. During 2002, the Company
     began phasing out these services. At December 31, 2002, the Company still
     receives certain services from TPC on a contract basis. The Company paid
     TPC $33.6 million and $30.0 million in 2002 and 2001, respectively, for
     these services.

     The Company sells structured settlement annuities to the property casualty
     insurance subsidiaries of TPC. Such premiums and deposits were $159
     million, $194 million and $191 million for 2002, 2001 and 2000,
     respectively.

     The Company has a license from TPC to use the names "Travelers Life &
     Annuity," "The Travelers Insurance Company," "The Travelers Life and
     Annuity Company" and related names in connection with the Company's
     business.

                                       59

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

16.  RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES

     The following table reconciles net income to net cash provided by operating
     activities:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
($ in millions)                                          2002           2001          2000
--------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>           <C>
Net Income                                             $  1,082       $  1,281      $  1,103
Adjustments to reconcile net income to net cash
provided by operating activities:
Realized (gains) losses                                     322           (125)           77
Deferred federal income taxes                               185            159            89
Amortization of deferred policy acquisition
costs                                                       393            379           347
Additions to deferred policy acquisition costs             (878)          (851)         (792)
Investment income                                          (119)          (493)         (384)
Premium balances                                             (7)             7            20
Insurance reserves and accrued expenses                     493            686           559
Other                                                      (403)           237           221
--------------------------------------------------------------------------------------------
Net cash provided by operations                         $ 1,068        $ 1,280       $ 1,240
--------------------------------------------------------------------------------------------
</TABLE>

17.  NON-CASH INVESTING AND FINANCING ACTIVITIES

     Significant non-cash investing and financing activities include the
     contribution of $2,225 million of Citigroup YYY preferred stock and related
     deferred tax liability of $779 million; a $17 million COLI asset and $98
     million deferred tax asset related to the transfer of $279 million of
     pension and postretirement benefits, transferred for $172 million cash; and
     the contribution of a non-insurance company, TLA Holdings, LLC, for $142
     million.

                                       60

<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Omitted pursuant to General Instruction I(2)(c) of Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION.

Omitted pursuant to General Instruction I(2)(c) of Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Omitted pursuant to General Instruction I(2)(c) of Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Omitted pursuant to General Instruction I(2)(c) of Form 10-K.

ITEM 14. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of the Company's disclosure controls and
procedures (as such term is defined in Rules 13a-14 (c) and 15d-14 (c)
under the Exchange Act) as of a date within 90 days prior to the filing
date of this annual report (the Evaluation Date). Based on such evaluation,
such officers have concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures are effective in alerting them on a
timely basis to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's reports
filed or submitted under the Exchange Act.

CHANGES IN INTERNAL CONTROLS

Since the Evaluation Date, there have not been any significant changes in
the Company's internal controls or in other factors that could
significantly affect such controls.

                                       61


<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)  Documents filed:

         (1)      Financial Statements. See index on page 18 of this report.

         (2)      Financial Statement Schedules. See index on page 67 of this
                  report.

         (3)      Exhibits. See Exhibit Index on page 63.

(b)  Reports on Form 8-K:
         None

                                       62

<PAGE>

                                  EXHIBIT INDEX

     EXHIBIT NO.      DESCRIPTION

               3.     Articles of Incorporation and By-Laws

                       a.)  Charter of The Travelers Insurance Company (the
                            "Company"), as effective October 19, 1994,
                            incorporated by reference to Exhibit 3.01 to the
                            Company's Quarterly Report on Form 10-Q for the
                            fiscal quarter ended September 30, 1994 (File No.
                            33-33691) (the "Company's September 30, 1994
                            10-Q").

                       b.)  By-laws of the Company, as effective October 20,
                            1994, incorporated by reference to Exhibit 3.02 to
                            the Company's September 30, 1994 10-Q.

            10.01      Lease for office space in Hartford, Connecticut dated
                       as of April 2, 1996, by and between the Company and The
                       Travelers Indemnity Company, incorporated by reference
                       to Exhibit 10.14 to the Annual Report on Form 10-K of
                       Travelers Property Casualty Corp. for the fiscal year
                       ended December 31, 1996 (File No. 1-14328).

            10.02      Trademark License Agreement between Travelers Property
                       Casualty Corp. and The Travelers Insurance Company,
                       effective as of August 20, 2002, incorporated by
                       reference to Exhibit 10.01 to the Company's Quarterly
                       Report on form 10-Q for the fiscal quarter ended
                       September 30, 2002.

            10.03      Lease for office space at CityPlace, Hartford,
                       Connecticut, dated March 28, 1996, by and between Aetna
                       Life and Casualty Company and The Travelers Indemnity
                       Company, (the "Cityplace Lease"), incorporated by
                       reference to Exhibit 10.10 to the Registration Statement
                       on Form S-1 of Travelers Insurance Group Holdings Inc.
                       (then known as Travelers/Aetna Property Casualty Corp.)
                       on April 22, 1996 (File No. 333-2254).

            10.04*     First Amendment, dated May 15, 2001, by and between
                       Aetna Inc. (formerly Aetna Life and Casualty Company) as
                       Landlord and The Travelers Indemnity Company, as Tenant,
                       with respect to the Cityplace Lease.


           10.05*      Assignment and Assumption Agreement dated as of August
                       19, 2002, by and between The Travelers Indemnity Company
                       as Assignor and the Company as Assignee, with respect to
                       the Cityplace Lease.


          14.01*      Citigroup Code of Ethics for Financial Professionals

              21.     Subsidiaries of the Registrant:

                            Omitted pursuant to General Instruction I(2)(b) of
                            Form 10-K.


           99.01*      Certification Pursuant to 18 USC Section 1350.

    ---------------------------------------------------------------------------

    *Filed herewith


                                       63

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15 (d) of the Securities
     Exchange Act of 1934, the registrant has duly caused this report to be
     signed on its behalf by the undersigned, thereunto duly authorized, on the
     21st day of March, 2003.

                         THE TRAVELERS INSURANCE COMPANY
                                  (Registrant)

         By:   /s/ Glenn D. Lammey
               --------------------
               Glenn D. Lammey
               Executive Vice President,
               Chief Financial Officer and Chief Accounting Officer
               (Principal Financial Officer and Principal Accounting Officer)

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
     report has been signed by the following persons on behalf of the registrant
     and in the capacities indicated on the 21st day of March, 2003.

<TABLE>
<CAPTION>
       SIGNATURE                                         CAPACITY
       ---------                                         --------
<S>                              <C>
/s/ George C. Kokulis            Director and Chief Executive Officer
------------------------         (Principal Executive Officer)
(George C. Kokulis)

/s/ Glenn D. Lammey              Director, Chief Financial Officer and Chief Accounting Officer
-------------------             (Principal Financial Officer and Principal Accounting Officer)
(Glenn D. Lammey)

/s/ Kathleen Lynch Preston      Director
--------------------------
(Kathleen Lynch Preston)

/s/ Marla Berman Lewitus        Director
------------------------
(Marla Berman Lewitus)
</TABLE>

     Supplemental Information to be Furnished With Reports Filed Pursuant to
     Section 15(d) of the Act by Registrants Which Have Not Registered
     Securities pursuant to Section 12 of the Act: NONE

     No Annual Report to Security Holders covering the registrant's last fiscal
     year or proxy material with respect to any meeting of security holders has
     been sent, or will be sent, to security holders.

                                 CERTIFICATIONS

     I, Glenn D. Lammey, Chief Financial Officer, certify that:

1.   I have reviewed this annual report on Form 10-K of The Travelers Insurance
     Company;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

                                       64

<PAGE>

                                 CERTIFICATIONS
                                  (continued)

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a)   designed such disclosure controls and procedures to ensure that
              material information relating to the registrant, including its
              consolidated subsidiaries, is made known to us by others within
              those entities, particularly during the period in which this
              annual report is being prepared;

         b)   evaluated the effectiveness of the registrant's disclosure
              controls and procedures as of a date within 90 days prior to the
              filing date of this annual report (the "Evaluation Date"); and

         c)   presented in this annual report our conclusions about the
              effectiveness of the disclosure controls and procedures based on
              our evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

         a)   all significant deficiencies in the design or operation of
              internal controls which could adversely affect the registrant's
              ability to record, process, summarize and report financial data
              and have identified for the registrant's auditors any material
              weaknesses in internal controls; and

         b)   any fraud, whether or not material, that involves management or
              other employees who have a significant role in the registrant's
              internal controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether there were significant changes in internal controls
     or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.

Date   March 21, 2003       /s/ Glenn D. Lammey
                            -------------------------------------------

                            Glenn D. Lammey
                            Executive Vice President,
                            Chief Financial Officer and Chief Accounting Officer
                            (Principal Financial Officer and Principal
                            Accounting Officer)

I, George C. Kokulis, Chief Executive Officer, certify that:

1.   I have reviewed this annual report on Form 10-K of The Travelers Insurance
     Company;

                                       65

<PAGE>

                                 CERTIFICATIONS
                                   (continued)

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a)   designed such disclosure controls and procedures to ensure that
              material information relating to the registrant, including its
              consolidated subsidiaries, is made known to us by others within
              those entities, particularly during the period in which this
              annual report is being prepared;

         b)   evaluated the effectiveness of the registrant's disclosure
              controls and procedures as of a date within 90 days prior to the
              filing date of this annual report (the "Evaluation Date"); and

         c)   presented in this annual report our conclusions about the
              effectiveness of the disclosure controls and procedures based on
              our evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

         a)   all significant deficiencies in the design or operation of
              internal controls which could adversely affect the registrant's
              ability to record, process, summarize and report financial data
              and have identified for the registrant's auditors any material
              weaknesses in internal controls; and

         b)   any fraud, whether or not material, that involves management or
              other employees who have a significant role in the registrant's
              internal controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date   March 21, 2003          /s/ George C. Kokulis
                               -------------------------------------------------

                               George C. Kokulis
                               Chief Executive Officer

                                       66

<PAGE>

         INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
                                                                                                   PAGE
<S>                                                                                                <C>
The Travelers Insurance Company and Subsidiaries

     Independent Auditors' Report                                                                     *

     Consolidated Statements of Income                                                                *

     Consolidated Balance Sheets                                                                      *

     Consolidated Statements of Changes In Shareholder's Equity                                       *

     Consolidated Statements of Cash Flows                                                            *

     Notes to Consolidated Financial Statements                                                       *

Independent Auditors' Report                                                                         68

Schedule I - Summary of Investments - Other than Investments in Related Parties 2002                 69

Schedule III - Supplementary Insurance Information 2000-2002                                         70

Schedule IV - Reinsurance 2000-2002                                                                  71

All other schedules are inapplicable for this filing.
</TABLE>

*  See index on page 18

                                       67

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

     The Board of Directors and Shareholder
     The Travelers Insurance Company:

     Under date of January 21, 2003, we reported on the consolidated balance
     sheets of The Travelers Insurance Company and subsidiaries as of December
     31, 2002 and 2001, and the related consolidated statements of income,
     changes in shareholder's equity and cash flows for each of the years in the
     three-year period ended December 31, 2002, which are included in this Form
     10-K. In connection with our audits of the aforementioned consolidated
     financial statements, we also audited the related financial statement
     schedules as listed in the accompanying index. These financial statement
     schedules are the responsibility of the Company's management. Our
     responsibility is to express an opinion on these financial statement
     schedules based on our audits.

     In our opinion, such financial statement schedules, when considered in
     relation to the basic consolidated financial statements taken as a whole,
     present fairly, in all material respects, the information set forth
     therein.

     As discussed in Note 1 to the consolidated financial statements, the
     Company changed its method of accounting for goodwill and other intangible
     assets in 2002, and its methods of accounting for derivative instruments
     and hedging activities and for securitized financial assets in 2001.

     /s/KPMG LLP

     Hartford, Connecticut
     January 21, 2003

                                       68

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES

                                   SCHEDULE I
       SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
                                DECEMBER 31, 2002
                                 ($ in millions)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                                                                       AMOUNT SHOWN IN
TYPE OF INVESTMENT                                              COST        VALUE      BALANCE SHEET(1)
------------------------------------------------------------------------------------------------------
<S>                                                           <C>         <C>          <C>
Fixed Maturities:

     Bonds:
         U.S. Government and government agencies and
           Authorities                                        $  6,416    $  6,658       $    6,658
         States, municipalities and political subdivisions         297         319              319
         Foreign governments                                       365         393              393
         Public utilities                                        3,261       3,149            3,149
         Convertible bonds and bonds with warrants attached        263         269              269
         All other corporate bonds                              24,679      25,532           25,532
------------------------------------------------------------------------------------------------------
              Total Bonds                                       35,281      36,320           36,320
     Redeemable preferred stocks                                   147         114              114
------------------------------------------------------------------------------------------------------
         Total Fixed Maturities                                 35,428      36,434           36,434
------------------------------------------------------------------------------------------------------

Equity Securities:

     Common Stocks:
         Banks, trust and insurance companies                       10          10               10
         Industrial, miscellaneous and all other                    38          40               40
------------------------------------------------------------------------------------------------------
              Total Common Stocks                                   48          50               50
     Nonredeemable preferred stocks                                280         282              282
------------------------------------------------------------------------------------------------------
         Total Equity Securities                                   328         332              332
------------------------------------------------------------------------------------------------------
Mortgage Loans                                                   1,985                        1,985
Real Estate Held For Sale                                           36                           36
Policy Loans                                                     1,168                        1,168
Short-Term Securities                                            4,414                        4,414
Trading Securities                                               1,531                        1,531
Other Investments   (2)(3)(4)                                    1,382                        1,382
------------------------------------------------------------------------------------------------------
         Total Investments                                    $ 46,272                   $   47,282
======================================================================================================
</TABLE>

(1)      Determined in accordance with methods described in Notes 1 and 4 of the
         Notes to Consolidated Financial Statements.

(2)      Excludes $3.2 billion of Citigroup Inc. preferred stock. See Note 14 of
         Notes to Consolidated Financial Statements.

(3)      Also excludes $315 million fair value of investment in affiliated
         partnership interests.

(4)      Includes derivatives marked to market and recorded at fair value in the
         balance sheet.

                                       69

<PAGE>

                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES

                                  SCHEDULE III
                       SUPPLEMENTARY INSURANCE INFORMATION
                                ($ in millions)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                 FUTURE
                                                 POLICY
                                                BENEFITS,
                                   DEFERRED       LOSSES,     OTHER POLICY
                                    POLICY      AND CLAIMS    CLAIMS AND                    NET        BENEFITS,
                                 ACQUISITION      LOSS          BENEFITS     PREMIUM    INVESTMENT    CLAIMS AND
                                    COSTS       EXPENSES(1)     PAYABLE      REVENUE       INCOME      LOSSES (2)
---------------------------------------------------------------------------------------------------------------
<S>                              <C>            <C>           <C>            <C>        <C>           <C>
                         2002
                         ----
Travelers Life & Annuity          $ 2,043      $   37,774     $   461       $   730      $ 2,646      $ 2,404
Primerica Life                      1,893           3,261         147         1,194          290          527
-------------------------------------------------------------------------------------------------------------
Total                             $ 3,936      $   41,035     $   608       $ 1,924      $ 2,936      $ 2,931
=============================================================================================================
                         2001
                         ----
Travelers Life & Annuity          $ 1,672      $   33,475     $   368       $   957      $ 2,530      $ 2,534
Primerica Life                      1,789           3,044         144         1,145          301          507
-------------------------------------------------------------------------------------------------------------
Total                             $ 3,461      $   36,519     $   512       $ 2,102      $ 2,831      $ 3,041
=============================================================================================================
                         2000
                         ----
Travelers Life & Annuity          $ 1,291      $   29,377     $   321       $   860      $ 2,450      $ 2,294
Primerica Life                      1,698           2,856         140         1,106          280          496
-------------------------------------------------------------------------------------------------------------
Total                             $ 2,989      $   32,233     $   461       $ 1,966      $ 2,730      $ 2,790
=============================================================================================================
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------
                                     AMORTIZATION OF
                                     DEFERRED POLICY    OTHER
                                       ACQUISITION     OPERATING    PREMIUMS
                                          COSTS        EXPENSES      WRITTEN
----------------------------------------------------------------------------
<S>                                  <C>               <C>          <C>
                         2002
                         ----
Travelers Life & Annuity                 $  174         $  190      $    729
Primerica Life                              219            217         1,184
----------------------------------------------------------------------------
Total                                    $  393         $  407      $  1,913
============================================================================
                         2001
                         ----
Travelers Life & Annuity                 $  171         $  154      $    955
Primerica Life                              208            217         1,157
----------------------------------------------------------------------------
Total                                    $  379         $  371      $  2,112
============================================================================
                         2000
                         ----
Travelers Life & Annuity                 $  166         $  233      $    859
Primerica Life                              181            230         1,115
----------------------------------------------------------------------------
Total                                    $  347         $  463      $  1,974
============================================================================
</TABLE>

(1)  Includes contractholder funds.

(2)  Includes interest credited to contractholders.

                                       70

<PAGE>


                THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES

                                   SCHEDULE IV
                                   REINSURANCE
                                 ($ in millions)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                                                          PERCENTAGE OF
                                                       CEDED TO OTHER    ASSUMED FROM                     AMOUNT ASSUMED
                                         GROSS AMOUNT    COMPANIES      OTHER COMPANIES     NET AMOUNT        TO NET
------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>           <C>              <C>                 <C>           <C>
2002
----
 Life Insurance In Force                  $ 549,066        $ 321,940        $  3,568          $230,694            1.5%

 Premiums:
      Life insurance                      $   2,227              377        $      -          $  1,850              -
      Accident and health insurance             316              242               -                74              -
      Property casualty                         109              109               -                 -              -
                                          ---------        ---------        --------          --------          -----
          Total Premiums                  $   2,652        $     728        $      -          $  1,924              -
                                          =========        =========        ========          ========          =====

2001
----
 Life Insurance In Force                  $ 510,457        $ 285,696        $  3,636          $228,397            1.6%

 Premiums:
      Life insurance                      $   2,378        $     352        $      -          $  2,026              -
      Accident and health insurance             321              246               1                76              -
      Property casualty                         180              180               -                 -              -
                                          ---------        ---------        --------          --------          -----
          Total Premiums                  $   2,879        $     778        $      1          $  2,102              -
                                          =========        =========        ========          ========          =====

2000
----
 Life Insurance In Force                  $ 480,958         $252,498        $  3,692          $232,152            1.6%

 Premiums:
      Life insurance                      $   2,106         $    330        $      -          $  1,776              -
      Accident and health insurance             322              132               -               190              -
      Property casualty                         216              216               -                 -              -
                                          ---------         --------        --------          --------          -----
          Total Premiums                  $   2,644         $    678        $      -          $  1,966              -
                                          =========         ========        ========          ========          =====
</TABLE>

                                       71