<PAGE>   1
                                  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, 1999
                                       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 1-14328
                                ----------------
                        TRAVELERS PROPERTY CASUALTY CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                  <C>
                 DELAWARE                                         06-1445591
(STATE OR OTHER JURISDICTION OF INCORPORATION        (I.R.S. EMPLOYER IDENTIFICATION NO.)
             OR ORGANIZATION)
</TABLE>


                  ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
                                 (860) 277-0111
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
                                ----------------


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:


<TABLE>
<CAPTION>
                               TITLE OF EACH CLASS                               NAME OF EACH EXCHANGE ON WHICH REGISTERED
                               -------------------                               -----------------------------------------
<S>                                                                              <C>
                 CLASS A COMMON STOCK, PAR VALUE $ .01 PER SHARE                          NEW YORK STOCK EXCHANGE
                         6-3/4% NOTES DUE APRIL 15, 2001                                  NEW YORK STOCK EXCHANGE
            8.08% TRUST PREFERRED SECURITIES OF SUBSIDIARY TRUST (AND                     NEW YORK STOCK EXCHANGE
                   REGISTRANT'S GUARANTY WITH RESPECT THERETO)
              8% TRUST PREFERRED SECURITIES OF SUBSIDIARY TRUST (AND                      NEW YORK STOCK EXCHANGE
                   REGISTRANT'S GUARANTY WITH RESPECT THERETO)
</TABLE>


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.  \X\

THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE
REGISTRANT AS OF MARCH 3, 2000 WAS APPROXIMATELY $1.91 BILLION.

AS OF MARCH 3, 2000, 57,131,376 SHARES OF THE REGISTRANT'S CLASS A COMMON STOCK,
PAR VALUE $ .01 PER SHARE, AND 328,020,170 SHARES OF THE REGISTRANT'S CLASS B
COMMON STOCK, PAR VALUE $.01 PER SHARE, WERE OUTSTANDING.

                       DOCUMENTS INCORPORATED BY REFERENCE

CERTAIN PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1999 ARE INCORPORATED BY REFERENCE INTO PART II
OF THIS FORM 10-K.

CERTAIN PORTIONS OF THE REGISTRANT'S PROXY STATEMENT FOR THE 2000 ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON APRIL 18, 2000 ARE INCORPORATED BY REFERENCE INTO
PART III OF THIS FORM 10-K.
<PAGE>   2
                        TRAVELERS PROPERTY CASUALTY CORP.

                           ANNUAL REPORT ON FORM 10-K

                     FOR FISCAL YEAR ENDED DECEMBER 31, 1999
                         ------------------------------
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
FORM 10-K
ITEM NUMBER                                                                     PAGE

         PART I

<S>                                                                             <C>
1.       Business...............................................................        1
2.       Properties.............................................................       44
3.       Legal Proceedings......................................................       44
4.       Submission of Matters to a Vote of Security Holders....................       45

         PART II

5.       Market for Registrant's Common Equity and
           Related Stockholder Matters..........................................       45
6.       Selected Financial Data................................................       46
7.       Management's Discussion and Analysis of Financial
           Condition and Results of Operations..................................       46
7A.      Quantitative and Qualitative Disclosures About Market Risk.............       46
8.       Financial Statements and Supplementary Data............................       47
9.       Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure..................................       47

         PART III

10.      Directors and Executive Officers of the Registrant.....................       47
11.      Executive Compensation.................................................       47
12.      Security Ownership of Certain Beneficial Owners
           and Management.......................................................       47
13.      Certain Relationships and Related Transactions.........................       47

         PART IV

14.      Exhibits, Financial Statement Schedules, and Reports
           on Form 8-K..........................................................       48
         Exhibit Index..........................................................       49
         Signatures.............................................................       53
         Index to Consolidated Financial Statements and Schedules...............      F-1
</TABLE>
<PAGE>   3
                                     PART I

ITEM 1.       BUSINESS.


         Travelers Property Casualty Corp. is a property-casualty insurance
holding company engaged, through its subsidiaries, in two business segments:
Commercial Lines and Personal Lines. The Company provides a wide range of
commercial and personal property and casualty insurance products and services to
businesses, government units, associations and individuals. Except as the
context otherwise requires, as used herein the "Company" refers to Travelers
Property Casualty Corp. and its consolidated subsidiaries.

         Travelers Property Casualty Corp. was formed in January 1996 to hold
the property and casualty insurance subsidiaries (collectively, "Travelers P&C")
of The Travelers Insurance Group Inc. ("TIGI"), an indirect wholly-owned
subsidiary of Citigroup Inc. ("Citigroup"). On April 2, 1996, the Company
purchased from Aetna Services, Inc. (formerly Aetna Life and Casualty Company)
("Aetna") all of the outstanding capital stock (the "Acquisition") of Aetna's
property and casualty insurance subsidiaries (collectively, "Aetna P&C"), for
approximately $4.2 billion in cash.

         Citigroup owns approximately 85% of the Company's outstanding common
stock at December 31, 1999. Citigroup is a diversified 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 that company and its consolidated
subsidiaries.

         The principal executive offices of the Company are located at One Tower
Square, Hartford, Connecticut 06183; telephone number (860) 277-0111.


         This discussion of the Company's business is organized as follows: (i)
a description of each of the Company's two business segments and related
services; (ii) a description of Interest Expense and Other; and (iii) certain
other information.(1) A glossary of insurance terms is included beginning on
page 35.
-----------


(1) Certain items in this Form 10-K, including certain matters discussed under
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" (the "MD&A"), are forward-looking statements. The matters
referred to in such statements could be affected by the risks and uncertainties
involved in the Company's business, including the effect of economic and market
conditions, the level and volatility of interest rates and currency values, the
impact of current or pending legislation and regulation and the other risks and
uncertainties detailed in the section under the heading "Outlook" and in the
Forward Looking Statements section of the MD&A.

<PAGE>   4
COMMERCIAL LINES

         The Company is the third largest writer of commercial lines insurance
in the United States based on 1998 direct written premiums published by A.M.
Best Company ("A.M. Best"). The Company's Commercial Lines offers a broad array
of property and casualty insurance and insurance-related services to its
customers. Commercial Lines is organized into four marketing and underwriting
groups that are designed to focus on a particular client base or industry
segment to provide products and services that specifically address customers'
needs: National Accounts, primarily serving large corporations; Commercial
Accounts, serving mid-size businesses for casualty products and both large and
mid-size businesses for property products; Select Accounts, serving small
businesses; and Specialty Accounts, providing a variety of specialty coverages.
The Company also has a dedicated group within Commercial Accounts that serves
the construction industry. In 1999, Commercial Lines generated net written
premiums of $4.4 billion.

         SELECTED PRODUCT AND MARKET INFORMATION

         The accompanying table sets forth by product line and market net
written premiums for Commercial Lines for the periods indicated. For a
description of the product lines and markets referred to in the table, see "--
Product Lines" and "--Principal Markets and Methods of Distribution,"
respectively.

         Many National Accounts customers demand service-type products,
primarily for workers' compensation coverage and, to a lesser extent, in general
liability and commercial automobile coverages. These types of products include
risk service, such as claims settlement, loss control and risk management
information services, and are generally offered in connection with a large
deductible or self-insured program. Many of these products generate fee income
rather than net written premiums, and are not reflected in the accompanying
table.

                                       2
<PAGE>   5
                           TOTAL NET WRITTEN PREMIUMS


<TABLE>
<CAPTION>
                                                                                     PERCENTAGE OF TOTAL
                                                   YEAR ENDED DECEMBER 31,           NET WRITTEN PREMIUMS
                                             ---------------------------------------     YEAR ENDED
                                                                                         DECEMBER 31,
                                             1999          1998(1)(3)     1997(2)(3)        1999
                                             ----          ----------     ----------        ----
                                                   (Dollars in millions)
<S>                                         <C>           <C>            <C>                <C>
NET WRITTEN PREMIUMS BY PRODUCT
LINE:
   Commercial multi-peril                   $1,469        $1,436         $1,037             33.3%
   Workers' compensation                     1,078         1,179          1,176             24.4
   Commercial automobile                       724           781            866             16.4
   Property                                    507           440            507             11.5
   General liability                           422           539            931              9.6
   Fidelity and surety                         206           209            201              4.7
   Other                                         2            30             39              0.1
                                            ------        ------         ------            -----
      Total Commercial Lines                $4,408        $4,614         $4,757            100.0%
                                            ======        ======         ======            =====
NET WRITTEN PREMIUMS BY MARKET:
   National Accounts                          $489          $625           $657             11.1%
   Commercial Accounts                       1,816         1,800          1,986             41.2
   Select Accounts                           1,494         1,494          1,432             33.9
   Specialty Accounts                          609           695            682             13.8
                                            ------        ------         ------            -----
      Total Commercial Lines                $4,408        $4,614         $4,757            100.0%
                                            ======        ======         ======            =====
</TABLE>



---------------------
         (1) Effective in 1998, net written premiums by product line reflect a
             change to conform the Aetna P&C and Travelers P&C statutory line
             assignments. There was no impact on total net written premiums.


         (2) 1997 includes a $142 million increase due to a change to conform
             the Aetna P&C method of recording certain net written premiums to
             the method employed by Travelers P&C.


         (3) 1998 and 1997 amounts have been restated to reclassify boiler and
             machinery and ocean marine business from Other to Property. There
             was no impact on total net written premiums.


         PRODUCT LINES

         The Company writes a broad range of commercial property and casualty
insurance for risks of all sizes. The core products in the Company's Commercial
Lines are as follows:

         COMMERCIAL MULTI-PERIL provides a combination of property and liability
coverage for businesses and business property for damages such as that caused by
fire, wind, hail, water, theft and vandalism, and protects businesses from
financial loss due to business interruption resulting from a covered loss. It
also insures businesses against third-party liability from accidents occurring
on their premises or arising out of their operations, such as injuries sustained
from products sold.

         WORKERS' COMPENSATION provides coverage for employers for specified
benefits payable under state or federal law for workplace injuries to employees.
There are typically four types of benefits payable under workers' compensation
policies: medical benefits, disability benefits, death benefits and vocational
rehabilitation benefits. The Company offers three types of

                                       3
<PAGE>   6

workers' compensation products: (i) guaranteed cost insurance products, in which
policy premium charges are fixed and do not vary as a result of the insured's
loss experience, (ii) loss-sensitive insurance products, including large
deductible plans and retrospectively rated policies, in which fees or premiums
are adjusted based on actual loss experience of the insured during the policy
period, and (iii) service programs, which are generally sold to the Company's
National Accounts customers, where the Company receives fees for providing loss
prevention, risk management, and claim and benefit administration services to
organizations pursuant to service agreements. The Company also participates in
state assigned risk pools servicing workers' compensation policies as a
servicing carrier and pool participant. The Company emphasizes managed care cost
containment strategies (which involve employers, employees and care providers in
a cooperative effort that focuses on the injured employee's early return to
work), cost-effective quality care, and customer service in this market.


         COMMERCIAL AUTOMOBILE provides coverage for businesses against losses
incurred from personal bodily injury, bodily injury to third parties, property
damage to an insured's vehicle, and property damage to other vehicles and other
property resulting from the ownership, maintenance or use of automobiles and
trucks in a business.

         GENERAL LIABILITY provides coverage for liability exposures including
bodily injury and property damage arising from products sold and general
business operations. Liability policies may also include coverage for directors'
and officers' liability arising in their official capacities, employment
practices liability insurance, fiduciary liability for trustees and sponsors of
pension, health and welfare, and other employee benefit plans, errors and
omissions insurance for employees, agents, professionals and others arising from
acts or failures to act under specified circumstances, as well as medical
malpractice, umbrella and excess insurance.

         PROPERTY provides coverage for loss or damage to buildings, inventory
and equipment from natural disasters, including hurricanes, windstorms,
earthquakes, hail, explosions, severe winter weather and other events such as
theft and vandalism, fires and storms and financial loss due to business
interruption resulting from covered property damage. Property also includes
boiler and machinery insurance, which provides coverage for loss or damage
resulting from the mechanical breakdown of boilers and machinery, and inland
marine, which provides coverage for goods in transit and unique, one-of-a-kind
exposures.

         FIDELITY AND SURETY provides fidelity insurance coverage which protects
an insured for loss due to embezzlement or misappropriation of funds by an
employee, and surety which is a three-party agreement whereby the insurer agrees
to pay a second party or make complete an obligation in response to the default,
acts or omissions of a third party. Surety is generally provided for
construction performance, legal matters such as appeals, trustees in bankruptcy
and probate and other performance bonds.

         OTHER coverages include miscellaneous assumed reinsurance.

         PRINCIPAL MARKETS AND METHODS OF DISTRIBUTION

         The Company distributes its commercial products through approximately
5,000 brokers and independent agencies located throughout the United States that
are serviced by

                                       4
<PAGE>   7
approximately 80 field offices. The Company seeks to establish relationships
with well-established, independent insurance agencies and brokers. In selecting
new independent agencies and brokers to distribute the Company's products, the
Company considers each agency's or broker's profitability, financial stability,
staff experience and strategic fit with the Company's operating and marketing
plans. Once an agency or broker is appointed, the Company carefully monitors its
performance.

         NATIONAL ACCOUNTS

         The Company's National Accounts provides a variety of casualty products
to large companies. The Company's National Accounts also includes the Company's
alternative market business (the "Alternative Market"), which primarily offers
workers' compensation products and services to the voluntary market including
employee groups, associations and franchises and to involuntary state pools.
National Accounts customers generally select loss-sensitive products in
connection with a large deductible or self-insured program and, to a lesser
extent, a guaranteed cost or a retrospectively rated insurance policy. Customers
are frequently national in scope and range in size from businesses with sales of
approximately $10 million per year to Fortune 2000 corporations. Through a
network of field offices, the Company's marketing and underwriting specialists
work closely with national and regional brokers to tailor insurance coverages to
meet customers needs. Workers' compensation accounted for approximately 72% of
the products sold in 1999 to National Accounts customers, based on gross written
premiums and fee income.

         In December 1998, the Company announced a global strategic alliance
with Winterthur International, called Travelers/Winterthur International, which
markets a variety of commercial lines products to multinational corporations.
Travelers/Winterthur International allows the Company to better serve its
customers requiring international underwriting and insurance solutions.

         The Alternative Market business sells claims and policy management
services to workers' compensation and automobile assigned risk plans and to
self-insurance pools throughout the United States. The Company services
approximately 30% of the total workers' compensation assigned risk market,
making it one of the largest servicing insurers in the industry. Assigned risk
plan contracts generated approximately $32 million in service fee income in 1999
for the Company.

         The Alternative Market business also services self-insurance groups,
sells excess workers' compensation coverage to these groups and markets various
workers' compensation specialty programs. Self-insurance groups and these
specialty programs generated net written premiums of $38 million and service fee
income of $3 million in 1999.

         In addition, the Alternative Market business participates in various
involuntary assigned risk pools, which provide insurance coverage to individuals
or other entities that otherwise are unable to purchase such coverage in the
voluntary market. Participation in these pools in most states is generally in
proportion to voluntary writings of related lines of business in that state.

                                       5
<PAGE>   8
         COMMERCIAL ACCOUNTS

         The Company's Commercial Accounts sells a broad range of property and
casualty insurance products through a large network of independent agents and
brokers. Commercial Accounts casualty products target businesses with 75 to
1,000 employees, while its property products target both large and mid-size
businesses. The Company offers a full line of products to its Commercial
Accounts customers, with an emphasis on guaranteed cost products.

         Commercial Accounts targets certain industries in which the Company has
claims, engineering and underwriting expertise and to which the Company has
established dedicated operations. Industry segments within the manufacturing
sector include: advanced technology, metal products, mineral products, plastic
and rubber products and wood products. Also targeted are colleges and
universities, food, retail, financial, property management and the wholesale
industries. The Company continues to develop new industry-targeted programs both
on a national and local level. Specific industry knowledge enables the Company
to select, as customers, better managed companies in an industry segment, to
tailor specialized coverages for those companies, to link price to the
individual exposure and to control risk. The Company uses components of this
approach specifically in connection with loss control and claims management
processing. Through a network of field offices, the Company's marketing and
underwriting specialists, who have point of sale authority, work closely with
local brokers and agents to tailor insurance coverage to individual customer
needs.

         Construction has dedicated operations that exclusively target the
construction industry, providing insurance and risk management services for
virtually all areas of construction, including general contractors, heavy
construction (including street and road) and special trade contractors, except
artisan or smaller trade contractors. The Company offers all product lines to
midsize and national customers in the construction market, including both
guaranteed cost and loss-responsive products, and wrap-up insurance programs,
with general liability, workers' compensation, commercial auto, commercial
property and inland marine coverages. The dedicated construction operations
provide specialized service and underwriting, with local market expertise and
national capability, that enable the Company to tailor specialized coverages,
have competitive pricing and control risk. This includes local underwriters who
understand their states' laws and claim climates, engineering and loss control
specialists, professional claim management and legal personnel with extensive
construction experience. Construction's products are distributed through
independent agents and brokers throughout the United States. Construction
operations contributed approximately 23% of the Commercial Accounts
premium-based business in 1999. Additionally, construction operations
service-based business contributed $5 million of service fees to the Company in
1999.

         SELECT ACCOUNTS

         Select Accounts serves firms typically with one to 75 employees.
Products offered by Select Accounts are generally guaranteed cost policies,
often a packaged product covering property and liability exposures. Products are
sold through independent agents, who are often the same agents that sell the
Company's Commercial Accounts and Personal Lines products.

                                       6
<PAGE>   9
         Personnel in the Company's field offices and other points of local
service, which are located throughout the United States, work closely with
agents to ensure a strong local presence in the marketplace. The Company
utilizes a marketing and underwriting approach based on agency automation and
defined underwriting criteria. Agency automation allows agents access to the
Company's price quotation and policy issuance systems and enables agents to
provide faster and more cost-effective service to customers with supervision and
underwriting control. Agents that do not utilize the automated quotation and
policy issuance systems work with the Company's sales and marketing
representatives who have point of sale authority. The Company also offers agents
the opportunity to utilize the Company's centralized service center. In return
for a fee, the Company assumes many of the back-office functions previously
performed by the agents, such as policy changes, billing inquiries, certificate
issuance and other administrative functions. Agents serving Select Accounts are
given greater control and discretion over underwriting decisions, within
predefined parameters, than brokers selling to larger accounts. Business in
other classifications is subject to consultative review by in-house
underwriters. The Company believes that its breadth of products, highly
qualified field staff and its technology offer distinct competitive advantages.

         SPECIALTY ACCOUNTS

         Specialty Accounts markets products to national, midsize and small
customers, and distributes them through both wholesale brokers and retail agents
and brokers throughout the United States. The Company believes that it has a
competitive advantage with respect to many of these products based on its
reputation for timely decision-making, underwriting, claim-handling abilities,
industry expertise and strong producer and customer relationships as well as its
ability to cross-sell with National Accounts, Commercial Accounts and Select
Accounts.

         The Company has two separate marketing and underwriting groups within
Specialty Accounts:

         Gulf Specialty focuses on many non-traditional lines of business, with
a particular emphasis on professional liability and management liability.
Products include directors' and officers' liability insurance, errors and
omissions coverages for financial institutions, investment counselors and mutual
fund advisors, and fidelity and surety coverage for related classes. In
addition, Gulf Specialty offers professional liability coverage for
professionals such as lawyers, architects and engineers, insurance agents,
podiatrists and chiropractors medical malpractice. Gulf Specialty also writes
umbrella coverage for various industries, provides insurance products to the
entertainment and transportation industries and provides insurance products for
other industry specific programs. Effective January 1, 1998, the Company's
former Travelers Specialty unit was combined with Gulf Specialty, and during
1998 and 1999 the majority of renewal policies within the former Travelers
Specialty unit are being written as Gulf Specialty policies.

         Bond Specialty's range of products includes fidelity and surety bonds,
directors' and officers' and other professional liability insurance, employment
practices liability insurance, fiduciary liability insurance and other related
coverages. The customer base ranges from large financial services companies and
commercial entities to small businesses and individuals. Products and services
are distributed primarily through agents and brokers. Bond Specialty is

                                       7
<PAGE>   10
organized around three broad customer segments: Financial Services, Construction
and Commercial Risk, and two specialized product niches: National Commercial
Surety and Professional Liability Services.

         PRICING AND UNDERWRITING

         Pricing levels for property and casualty insurance products by the
Company's Commercial Lines are generally developed based upon the frequency and
severity of estimated losses, the expenses of producing business and
administering claims, and a reasonable allowance for profit. The Company has a
disciplined approach to underwriting and risk management which emphasizes a
profit-oriented approach rather than a premium volume or market share-oriented
approach to underwriting. The market conditions for many Commercial Lines
products are characterized by difficult pricing and increased competition,
although indications of stronger pricing levels were evident in the last six
months of 1999.

         A significant portion of Commercial Lines business is written with
large deductible insurance policies. Under certain workers' compensation
insurance contracts with deductible features, the Company is obligated to pay
the claimant the full amount of the claim. The Company is subsequently
reimbursed by the contractholder for the deductible amount, and is subject to
credit risk until such reimbursement is made. At December 31, 1999,
contractholder receivables and payables on unpaid losses were each approximately
$2.1 billion. Retrospectively rated policies are primarily used in workers'
compensation coverage. Although the retrospectively rated feature of the policy
substantially reduces insurance risk for the Company, it introduces credit risk
to the Company. Receivables on unpaid losses from holders of retrospectively
rated policies totaled approximately $382 million at December 31, 1999.
Collateral, primarily letters of credit and, to a lesser extent, cash collateral
or surety bonds, is generally requested for large deductible plans and/or
retrospectively rated policies that provide for deferred collection of
deductibles and/or ultimate premiums. The amount of collateral requested is
predicated upon the creditworthiness of the customer and the nature of the
insured risks. Commercial Lines continually monitors the credit exposure on
individual accounts and the adequacy of collateral.

         The Company has developed an underwriting and pricing methodology that
incorporates underwriting, claims, engineering, actuarial and product
development disciplines for particular industries. This approach is designed to
maintain high quality underwriting and pricing discipline. This approach
utilizes proprietary data gathered and analyzed by the Company with respect to
its Commercial Lines business over many years. The underwriters and engineers
use this information to assess and evaluate risks prior to quotation. This
information provides specialized knowledge about industry segments and
catastrophe management and helps analyze risk based on account characteristics
and pricing parameters designed to ensure that the Company does not compromise
its underwriting integrity.

         Select Accounts uses a process based on standard industry
classification (S.I.C.) to allow agents and field marketing representatives to
make underwriting and pricing decisions within predetermined classifications,
because underwriting criteria and pricing tend to be more standardized for
smaller businesses.

                                       8
<PAGE>   11
         The Company is also a member of and participates in the underwriting
operations of an insurance pool, which makes independent underwriting decisions
on behalf of its members. This pool insures specialized risks for exposures
related to the nuclear power industry.

         The Company continually reviews its exposure to catastrophic losses and
attempts to mitigate such exposure. See "Reinsurance." The Company uses
sophisticated computer modeling techniques to assess underwriting risks and
renewal of business in catastrophe-prone areas.

         GEOGRAPHIC DISTRIBUTION

         The following table shows the distribution of Commercial Lines' direct
written premiums for the states that accounted for the majority of premium
volume for the year ended December 31, 1999:

<TABLE>
<CAPTION>
            STATE                                  % OF TOTAL
            -----                                  ----------
<S>                                                <C>
            New York                                 13.4%
            California                                8.8
            Texas                                     6.8
            Massachusetts                             5.8
            Florida                                   4.4
            New Jersey                                4.3
            Pennsylvania                              4.1
            Illinois                                  3.9
            Connecticut                               3.4
            North Carolina                            3.2
            Georgia                                   3.0
            All Others (1)                           38.9
                                                    -----
            TOTAL                                   100.0%
                                                    =====
</TABLE>

--------
(1)   No other single state accounted for 3.0% or more of the total direct
      written premiums written in 1999 by the Company.

PERSONAL LINES

         The Company is the second largest writer of personal lines insurance
through independent agents and the eighth largest writer of personal lines
insurance overall in the United States based on 1998 direct written premiums
published by A.M. Best. In 1999, Personal Lines generated net written premiums
of approximately $3.8 billion. Personal Lines primarily offers personal
automobile and homeowners insurance.

         SELECTED PRODUCT INFORMATION

         The accompanying table sets forth by product line net written premiums
for Personal Lines for the periods indicated. For a description of the product
lines referred to in the accompanying table below, see "-- Product Lines."

                                       9
<PAGE>   12
                           TOTAL NET WRITTEN PREMIUMS

<TABLE>
<CAPTION>
                                                                                     PERCENTAGE OF TOTAL NET
                                                                                         WRITTEN PREMIUMS
                                                 YEAR ENDED DECEMBER 31,                    YEAR ENDED
                                                 ------------------------                 DECEMBER 31,
                                          1999           1998           1997                   1999
                                          ----           ----           ----                   ----
                                                 (Dollars in millions)
<S>                                      <C>            <C>            <C>                    <C>
NET WRITTEN PREMIUMS BY PRODUCT
LINE:
   Personal automobile                   $2,369         $2,328         $1,950                  62.3%
   Homeowners and other (1)               1,436          1,162          1,124                  37.7
                                         ------         ------         ------                 -----
      Total Personal Lines               $3,805         $3,490         $3,074                 100.0%
                                         ======         ======         ======                 =====
</TABLE>
-------------------
(1)   The 1999 and 1997 premiums include adjustments associated with reinsurance
      transactions, which increased homeowners premiums by $72 million and $69
      million, respectively.

         PRODUCT LINES
         The Company writes virtually all types of property and casualty
insurance covering personal risks. Personal Lines had approximately 5.3 million,
5.1 million and 4.6 million policies in force at December 31, 1999, 1998 and
1997, respectively. The primary coverages in Personal Lines are personal
automobile and homeowners insurance sold to individuals.

         PERSONAL AUTOMOBILE provides coverage for liability to others for both
bodily injury and property damage and for physical damage to an insured's own
vehicle from collision and various other perils. In addition, many states
require policies to provide first-party personal injury protection, frequently
referred to as no-fault coverage. The Company distributes nonstandard automobile
insurance in Texas, New York, Florida, Georgia and Connecticut through
independent agents. In 2000, the Company plans to expand this product into
additional states where it has significant agency representation, including
Pennsylvania and Virginia.

         HOMEOWNERS provides protection against losses to dwellings and contents
from a wide variety of perils, as well as coverage for liability arising from
ownership or occupancy. The Company writes homeowners insurance for dwellings,
condominiums and rental property contents. OTHER products include coverage for
boats, personal articles such as jewelry, and umbrella liability protection.

         SELECTED DISTRIBUTION CHANNEL INFORMATION

         The accompanying table sets forth by distribution channel net written
premiums for Personal Lines for the periods indicated. For a description of the
distribution channels referred to in the accompanying table below, see
"Principal Markets and Methods of Distribution."

                                       10
<PAGE>   13
                           TOTAL NET WRITTEN PREMIUMS

<TABLE>
<CAPTION>
                                                                                      PERCENTAGE OF TOTAL NET
                                                                                          WRITTEN PREMIUMS
                                                   YEAR ENDED DECEMBER 31,                   YEAR ENDED
                                                   ------------------------                 DECEMBER 31,
                                             1999           1998            1997               1999
                                             ----           ----            ----      ------------------------
                                                    (Dollars in millions)
NET WRITTEN PREMIUMS BY
DISTRIBUTION CHANNEL (1):
<S>                                         <C>            <C>             <C>                <C>
   Independent agents                       $3,006         $2,853          $2,703              79.0%
   Affinity group marketing                    353            264             180               9.3
   Joint marketing arrangements                221            160             119               5.8
   SECURE                                      225            213              72               5.9
                                            ------         ------          ------             -----
     Total Personal Lines                   $3,805         $3,490          $3,074             100.0%
                                            ======         ======          ======             =====

</TABLE>

--------------------------
(1) The 1999 and 1997 premiums include adjustments associated with reinsurance
transactions, which increased net written premiums by $72 million and $69
million, respectively.

         PRINCIPAL MARKETS AND METHODS OF DISTRIBUTION

         The Company's Personal Lines products are distributed primarily through
approximately 5,400 independent agencies located throughout the United States,
supported by a network of 13 field marketing offices and five customer service
centers. Personal Lines also markets through alternative distribution channels,
including sponsoring organizations such as employee and affinity groups, and
joint marketing arrangements with other insurers. In addition, in 1998, Personal
Lines began cross-marketing its products to Citibank customers, primarily credit
cardholders. (Citibank is a unit of Citigroup.) In 1999, the Company expanded
its presence on the internet. Although it is in the early stages of growth, this
new distribution channel provides a significant opportunity to reach potential
customers. Personal Lines had also been marketing products through independent
agents of Primerica Financial Services, a unit of Citigroup, under the TRAVELERS
SECURE(R) program. In the third quarter of 1999 this program was curtailed. High
loss ratios and acquisition costs, further compounded by limited ability to
raise prices to reflect loss trends, led to the curtailment of sales through
TRAVELERS SECURE(R). In the states of Florida, New Jersey and Massachusetts, the
Company operates domestic companies to enhance its competitive capability in
these highly regulated markets. The Company primarily distributes its products
through independent agents in these markets. While the Company's principal
markets for Personal Lines insurance are in states along the East Coast, in the
South and Texas, Personal Lines is expanding its geographical presence across
the United States.

         Insurance companies generally market personal automobile and homeowners
insurance through one of three distribution systems: independent agents,
exclusive agents or direct writing. The independent agents that distribute the
Company's Personal Lines products usually represent several unrelated property
and casualty companies. Exclusive agents represent one company and generally
sell a number of products, including life insurance and annuities in addition to
property-casualty products. In contrast, direct writing companies generally
operate by mail and telephone through sales representatives. Due in part to the
expense advantage that direct writers may have relative to companies using
independent agents and changing customer buying

                                       11
<PAGE>   14
preferences to buying directly from companies, the direct writing companies have
gradually expanded their market share in recent years.

         The Company's Personal Lines continues to distribute its products
through the independent agency distribution system, recognizing the service and
underwriting advantages the agent can deliver. In addition to its agency
distribution system, the Company has broadened its distribution channels for
Personal Lines products to include sponsoring organizations such as employee and
affinity groups and joint marketing arrangements with other insurers. In 1998,
Personal Lines began marketing products directly to Citibank customers,
primarily credit cardholders: potential customers are solicited by telephone
after transfer from a Citibank customer service call center, through direct mail
or inserts in credit card statements. Potential customers for the Citibank
program and certain affinity group programs are directed to one of the Company's
two telemarketing centers where an authorized telemarketing sales representative
underwrites and sells new business to interested individuals.

         Since 1995, the Company has had a marketing agreement with GEICO to
write the majority of GEICO's homeowners business, and to receive referrals from
GEICO for new homeowners business. This agreement added historically profitable
business and helped to geographically diversify the homeowners line of business.
It also provided for limits on Personal Lines' obligation to write new and
renewal business in certain catastrophe-prone areas.

         The Company believes that its focus on service and development of
long-term relationships with individual agents gives it a competitive advantage
in the Personal Lines market. The Company believes that its expense management
practices, including prompt and efficient claims handling and high level of
automation, allow it to offer a competitively priced product. In addition, the
Company is leveraging its service, claims handling and automation experience in
the expansion of the distribution of Personal Lines products through its
alternative distribution channels.

         PRICING AND UNDERWRITING

         Pricing for personal automobile insurance is driven by changes in the
frequency of claims and by inflation in the cost of automobile repairs, medical
care and litigation of liability claims. As a result, the profitability of the
business is largely dependent on promptly identifying and rectifying disparities
between premium levels and expected claim costs, and obtaining approval of the
state regulatory authorities for indicated rate increases. Premiums charged for
physical damage coverage reflect insured car values and, accordingly, premium
levels are somewhat related to the volume of new car sales.

         Pricing in the homeowners business is also driven by changes in the
frequency of claims and by inflation in building supplies, labor costs and
household possessions. Most homeowners policies offer (but do not require)
automatic increases in coverage to reflect growth in replacement costs and
property values. In addition to the normal risks associated with any multiple
peril coverage, the profitability and pricing of homeowners insurance is
affected by the incidence of natural disasters, particularly hurricanes, winter
storms, earthquakes and tornadoes. In order to reduce its exposure to
catastrophe losses, the Company has limited the writing of new homeowners
business and selectively non-renewed existing homeowners business in certain

                                       12
<PAGE>   15
markets, tightened underwriting standards and implemented price increases in
certain catastrophe-prone areas, and instituted deductibles in hurricane-prone
areas, all subject to restrictions imposed by insurance regulatory authorities.
In California, the Company introduced in 1996 an endorsement that reduces its
exposure to catastrophic earthquake claims by increasing the deductible and
limiting other policy coverages in the event of an earthquake loss. The Company
uses computer modeling techniques to assess its level of exposure to loss in
catastrophe-prone areas. Changes to methods of marketing and underwriting in
coastal areas of Florida and New York, and in California are subject to
state-imposed restrictions, the general effect of which is to make it more
difficult for an insurer to reduce exposures.

         Insurers writing property-casualty policies are generally unable to
increase rates until some time after the costs associated with coverage have
increased, primarily as a result of state insurance rate regulation laws. The
pace at which an insurer can change rates in response to competition or to
increased costs depends, in part, on whether the applicable rate regulation law
requires prior approval of a rate increase or notification to the regulator
either before or after a rate increase is imposed. In states having prior
approval laws, a rate must be approved by the regulator before it may be used by
the insurer. In states having "file-and-use" laws, the insurer must file the
rate with the regulator, but does not need to wait for approval before using it.
A "use-and-file" law requires an insurer to file rates within a certain period
of time after the insurer begins using the new rate. Approximately one-half of
the states require prior approval of most rate increases.

         Underwriting of Personal Lines new business policies is conducted
primarily by independent agents. Agents underwrite Personal Lines policies under
strict underwriting guidelines established and monitored by underwriters in the
Company's customer service centers. Each agent is assigned to a specific
employee of the Company or team of employees responsible for working with the
agent on business plan development, marketing, and overall growth and
profitability. The Company uses agency level management information to analyze
and understand results and to identify problems and opportunities.

         Personal Lines products are also sold through alternative marketing
channels. In these channels, underwriting is conducted by employees of the
Company. Underwriters work with Company management on business plan development,
marketing, and overall growth and profitability. Channel-specific production
information is used to analyze results and identify problems and opportunities.

                                       13
<PAGE>   16
         GEOGRAPHIC DISTRIBUTION

         The following table shows the distribution of Personal Lines' direct
written premiums for the states that accounted for the majority of premium
volume for the year ended December 31, 1999:

STATE                                % OF TOTAL
-----                                ----------
New York                                21.3%
Pennsylvania                             8.1
Texas                                    8.0
New Jersey                               7.2
Massachusetts                            6.2
Florida                                  5.9
Connecticut                              5.5
Georgia                                  4.0
Virginia                                 3.9
North Carolina                           3.4
California                               3.2
All others (1)                          23.3
                                       -----
TOTAL                                  100.0%
                                       =====
---------------------
(1)   No other single state accounted for 3.0% or more of the total direct
      written premiums written in 1999 by the Company.

CLAIM ADMINISTRATION

         The Company employs claim adjusters, appraisers, investigators, staff
attorneys, system specialists and training, management and support personnel in
the claim department. These employees manage over 90% of the Company's claims.
Approved external vendors, such as claim adjusters, appraisers, investigators
and attorneys, are used only when the geographic location or unique issues
raised by a claim warrant such use. To be approved, these vendors must have a
proven record and have demonstrated cost-consciousness and relevant technical
skills.

         The Company seeks to achieve optimal levels of losses and loss
adjustment expenses while maintaining its high level of service. The Company's
claim department is organized to meet these goals. The organization features
seven operating regions, and grants to the regions authority to address the
needs of local customers, underwriters, agents and brokers across Commercial
Lines and Personal Lines. Additional claim staffs are dedicated to each of the
Personal Lines domestic companies as well as to the Commercial Lines Specialty
Accounts businesses. In addition, technical and legal personnel have created
teams around technical specialties to better support the regional operations.
This structure permits the Company to maintain the economies of scale of a
larger, established company while enjoying the flexibility of a smaller company
that can quickly respond to the needs of its customers, underwriters, agents and
brokers. The home office continues to monitor adherence to claims policies and
procedures, the adequacy of case reserves, loss and expense controls and
productivity and service standards.

                                       14
<PAGE>   17
         The Company continuously reviews its claim practices in its effort to
meet its service and loss and expense objectives. The Company's claim
adjudication process focuses on the segmentation of claims, based on complexity
of the claim, required technical specialization, and speed of process. To
enhance this effort, the Company's claim handling staff and workflow design is
organized around line of business specialization. In 1999, the Company initiated
the dedication of claim professionals to the Company's Construction market,
piloted the use of digital and wireless technology and internet-based claim
notification and expanded its "catastrophe van" fleet. In addition, the Company
began to offer to Personal Lines and Select Accounts claimants the option of
utilizing the Contractor@Once(sm) service whereby the Company arranges for a
local, independent contractor to provide estimates. Claimants then have the
option to directly contract with the same independent contractors to make
repairs to their home or small business.

         Another example of this effort is TravComp(sm), a workers' compensation
claim and medical management program that assists adjusters in promptly
investigating, validating or rejecting workers' compensation claims. Medical
management workstations permit nurse professionals to access additional
information that supports the Company's emphasis on early return to work
strategies for these claims. These new technologies, together with better
matching of professional skills and authority to specific claim issues, have
resulted in workers' compensation cases closing faster and with lower losses and
loss adjustment expenses.

         Environmental, asbestos and other cumulative injury claims are
separately managed by the Company's Special Liability Group. See "Environmental,
Asbestos and Other Cumulative Injury Claims."

REINSURANCE

         The Company reinsures a portion of the risks it underwrites in order to
control its exposure to losses, stabilize earnings and protect capital
resources. The Company cedes to reinsurers a portion of these risks and pays
premiums based upon the risk and exposure of the policies subject to such
reinsurance. Reinsurance involves credit risk and is generally subject to
aggregate loss limits. Although the reinsurer is liable to the Company to the
extent of the reinsurance ceded, the Company remains primarily liable as the
direct insurer on all risks reinsured. Reinsurance recoverables are reported
after allowances for uncollectible amounts. The Company also holds collateral,
including escrow funds and letters of credit, under certain reinsurance
agreements. The Company monitors the financial condition of reinsurers on an
ongoing basis, and reviews its reinsurance arrangements periodically. Reinsurers
are selected based on their financial condition, business practices and the
price of their product offerings. For additional information concerning
reinsurance, see Note 5 of Notes to Consolidated Financial Statements.

         The Company utilizes a variety of reinsurance agreements to control its
exposure to large property and casualty losses. The Company utilizes the
following types of reinsurance: (i) facultative reinsurance, in which
reinsurance is provided for all or a portion of the insurance provided by a
single policy and each policy reinsured is separately negotiated; (ii) treaty
reinsurance, in which reinsurance is provided for a specified type or category
of risks; and (iii)

                                       15
<PAGE>   18
catastrophe reinsurance, in which the Company is indemnified for an amount of
loss in excess of a specified retention with respect to losses resulting from a
catastrophic event.

         The following presents the Company's top five reinsurers (except
Lloyd's of London ("Lloyd's") which is discussed in more detail below) by
reinsurance recoverable at December 31, 1999 (in millions):

<TABLE>
<CAPTION>

                                                  REINSURANCE
                      REINSURER                   RECOVERABLE       A.M. BEST RATING OF REINSURER
                      ---------                   -----------       -----------------------------
<S>                                                   <C>           <C>
General Reinsurance Corporation                       $493           A++     highest of 15 ratings
American Re-Insurance Company                          398           A++     highest of 15 ratings
Executive Risk Indemnity Inc.                          153           A       3rd highest of 15 ratings
Employers Reinsurance Corporation                      126           A++     highest of 15 ratings
Tokio Marine & Fire Ins. Co. Ltd, US Branch            110           A++     highest of 15 ratings
</TABLE>

         As of December 31, 1999, the Company had reinsurance recoverables from
Lloyd's of $375 million. In 1996, Lloyd's restructured its operations with
respect to claims for years prior to 1993 and reinsured these into Equitas
Limited ("Equitas"), which is currently unrated. Approximately $304 million of
the Company's Lloyd's reinsurance recoverable at December 31, 1999 relates to
Equitas liabilities. The remaining recoverables of $71 million are from the
continuing market of Lloyd's, which is rated A (3rd highest of 15 ratings) by
A.M. Best.

         The impact of the Lloyd's restructuring on the collectibility of
amounts recoverable by the Company from Lloyd's cannot be quantified at this
time. The Company believes that it is possible that an unfavorable impact on
collectibility could have a material adverse effect on the Company's operating
results in a future period. However, the Company believes that it is not likely
that the outcome of these matters would have a material adverse effect on the
Company's financial condition or liquidity.

         The Company participates in a pool with other insurers to provide
capacity for unique and high-valued risks for exposures related to the nuclear
power industry. The Company's maximum net exposure to this type of business at
December 31, 1999 was $15 million per risk. Beginning January 1, 2000, the
Company's maximum net exposure to this type of business was reduced to $1
million per risk.

         At December 31, 1999, the Company had $9.4 billion in reinsurance
recoverables. Of this amount, $2.4 billion is for mandatory pools and
associations that relate primarily to workers' compensation service business and
have the obligation of the participating insurance companies on a joint and
several basis supporting these cessions. Also, $2.4 billion is attributable to
structured settlements relating primarily to personal injury claims for which
the Company has purchased an annuity and remains contingently liable in the
event of a default by the company issuing the annuity. Of the remaining $4.6
billion ceded to reinsurers at December 31, 1999, $871 million was
environmental, asbestos and other cumulative injury-related and the remainder
principally reflects reinsurance in support of ongoing business. In addition, at
December 31, 1999, $533 million of reinsurance recoverables were collateralized
by letters of credit and escrow funds.

                                       16
<PAGE>   19
         Net Retention Policy. The descriptions below relate to reinsurance
arrangements of the Company in effect at January 1, 2000. For third-party
liability, including automobile no-fault, the reinsurance agreements used by
Commercial Accounts, Construction and Select Accounts limit the net retention to
a maximum of $4 million per insured, per occurrence with a $5 million annual
aggregate deductible. Gulf Specialty utilizes various reinsurance mechanisms and
has limited its net retention to a maximum of $3.75 million per risk for any
line of business. For commercial property insurance, there is a $5 million
maximum retention per risk with 100% reinsurance coverage for risks with higher
limits. The reinsurance agreement in place for workers' compensation policies
written by Commercial Accounts, Construction, National Accounts, Select
Accounts, and some segments of Alternative Markets and Gulf Specialty covers
100% of each loss between $1 million and $10 million. For National Accounts,
reinsurance arrangements are typically tiered, or layered, such that only levels
of risk acceptable to the Company are retained. Personal Lines retains the first
$5 million of umbrella policies and purchases facultative reinsurance for limits
over $5 million. For personal property insurance, there is a $6 million maximum
retention per risk. For directors' and officers' liability, employment practices
liability and blended insurance, Bond Specialty retains up to $5 million per
risk. For surety protection, Bond Specialty has reinsurance coverage for 95% of
up to $50 million of liability in excess of $50 million of liability. The risk
tolerance of Bond Specialty varies by line of business and by risk. Bond
Specialty purchases an accident year aggregate cover attaching at a 40% loss
ratio to lower its exposure to large losses or loss frequency. The first layer
of the aggregate provides 96% of approximately $40 million and the second layer
provides 80% of approximately $35 million of reinsurance coverage in excess of a
$92 million retention.

         Catastrophe Reinsurance. The Company utilizes reinsurance agreements
with nonaffiliated reinsurers to control its exposure to losses resulting from
one occurrence. For the accumulation of net property losses arising out of one
occurrence, reinsurance agreements cover 44% of total losses between $250
million and $750 million. For multiple workers' compensation losses arising from
a single occurrence, reinsurance agreements cover 100% of losses between $10
million and $250 million and, for workers' compensation losses caused by
property perils, reinsurance agreements cover 44% of losses between $250 million
and $750 million.

         For the accumulation of net casualty losses arising out of one
occurrence, a casualty clash agreement covers 85% of losses between $10 million
and $50 million.

         The Company reviews its risk and catastrophe covers at least quarterly
and makes changes it deems appropriate.

         FLORIDA REINSURANCE FUND

         The Company also participates in the Florida Hurricane Catastrophe Fund
("FHCF"), which is a state-mandated catastrophe reinsurance fund that provides
reimbursement to insurers for a portion of their future catastrophic hurricane
losses. FHCF is primarily funded by premiums from insurance companies that write
residential property business in Florida and, if insufficient, assessments on
insurance companies that write other property and casualty insurance, excluding
workers' compensation. FHCF's resources are limited to these contributions and
to its borrowing capacity at the time of a significant catastrophe in Florida.

                                       17
<PAGE>   20
There can be no assurance that these resources will be sufficient to meet the
obligations of FHCF.

         The Company's recovery of less than contracted amounts from FHCF could
have a material adverse effect on the Company's results of operations in the
event of a significant catastrophe in Florida. However, the Company believes
that it is not likely that the Company's recovery of less than contracted
amounts from FHCF would have a material adverse effect on the Company's
financial condition or liquidity.

RESERVES

         Property and casualty claim reserves are established to account for the
estimated ultimate costs of claims and claim adjustment expenses for claims that
have been reported but not yet settled and claims that have been incurred but
not reported. The Company establishes reserves by line of business, coverage and
year.

         The process of estimating claim reserves is imprecise due to a number
of variables. These variables are affected by both internal and external events
such as changes in claims handling procedures, inflation, judicial trends and
legislative changes. Many of these items are not directly quantifiable,
particularly on a prospective basis. Additionally, there may be significant
reporting lags between the occurrence of the insured event and the time it is
actually reported to the insurer. The Company continually refines reserve
estimates in a regular ongoing process as experience develops and further claims
are reported and settled. The Company reflects adjustments to reserves in the
results of operations in the periods in which the estimates are changed. In
establishing reserves, the Company takes into account estimated recoveries for
reinsurance, salvage and subrogation.

         The Company derives estimates for unreported claims and development on
reported claims principally from actuarial analyses of historical patterns of
claims development by accident year for each line of business and market
segment. Similarly, the Company derives estimates of unpaid claim adjustment
expenses principally from actuarial analyses of historical development patterns
of the relationship of claim adjustment expenses to losses for each line of
business and market segment. For a description of the Company's reserving
methods for environmental and asbestos claims, see "Environmental, Asbestos and
Other Cumulative Injury Claims."

         Discounting. The liability for losses for certain long-term disability
payments under workers' compensation insurance and workers' compensation excess
insurance has been discounted using a maximum interest rate of 5%. At December
31, 1999, 1998 and 1997 the combined amounts of discount for the Company were
$832 million, $781 million and $912 million, respectively.

         For a reconciliation of beginning and ending property and casualty
insurance claims and claim adjustment expense reserves of the Company for each
of the last three years, see Note 6 of Notes to Consolidated Financial
Statements.

                                       18
<PAGE>   21
         The table at the end of this section sets forth the year-end reserves
from 1989 through 1999 and the subsequent changes in those reserves, presented
on a historical basis for the Company. Accordingly, the original estimates,
cumulative amounts paid and reestimated reserves in the table for the years
1989-1995 have not been restated to include Aetna P&C. Beginning in 1996, the
table includes the reserve activity of Aetna P&C. The data in the table is
presented in accordance with reporting requirements of the Securities and
Exchange Commission. Care must be taken to avoid misinterpretation by those
unfamiliar with such information or familiar with other data commonly reported
by the insurance industry. The accompanying data is not accident year data, but
rather a display of 1989-1999 year-end reserves and the subsequent changes in
those reserves.

         For instance, the "cumulative deficiency or redundancy" shown in the
accompanying table for each year represents the aggregate amount by which
original estimates of reserves as of that year-end have changed in subsequent
years. Accordingly, the cumulative deficiency for a year relates only to
reserves at that year-end and such amounts are not additive. Expressed another
way, if the original reserves at the end of 1989 included $4 million for a loss
that is finally settled in 1999 for $5 million, the $1 million deficiency (the
excess of the actual settlement of $5 million over the original estimate of $4
million) would be included in the cumulative deficiencies in each of the years
1989-1998 shown in the accompanying table.

         Certain factors may distort the re-estimated reserves and cumulative
deficiency or redundancy shown in the accompanying table. For example, a
substantial portion of the cumulative deficiencies in each of the years
1989-1999 arises from claims on policies written prior to the mid-1970s
involving liability exposures such as environmental, asbestos and other
cumulative injury claims. In the post-1984 period, the Company has developed
more stringent underwriting standards and policy exclusions and has
significantly contracted or terminated the writing of such risks. See
"Environmental, Asbestos and Other Cumulative Injury Claims." General conditions
and trends that have affected the development of these liabilities in the past
will not necessarily recur in the future.

         Other factors that affect the data in the accompanying table include
the discounting of workers' compensation reserves and the use of retrospectively
rated insurance policies. To the extent permitted under applicable accounting
practices, workers' compensation reserves are discounted to reflect the time
value of money, due to the relatively long time period over which these claims
are to be paid. Apparent deficiencies will continue to occur as the discount on
these workers' compensation reserves is accreted at the appropriate interest
rates. Also, a portion of National Accounts business is underwritten with
retrospectively rated insurance policies in which the ultimate loss experience
is primarily borne by the insured. For this business, increases in loss
experience result in an increase in reserves, and an offsetting increase in
amounts recoverable from insureds. Likewise, decreases in loss experience result
in a decrease in reserves, and an offsetting decrease in amounts recoverable
from these insureds. The amounts recoverable on these retrospectively rated
policies mitigate the impact of the cumulative deficiencies or redundancies but
are not reflected in the accompanying table.

         Because of these and other factors, it is difficult to develop a
meaningful extrapolation of estimated future redundancies or deficiencies in
loss reserves from the data in the accompanying table.

                                       19
<PAGE>   22
         The differences between the reserves for claims and claim adjustment
expenses shown in the accompanying table, which is prepared in accordance with
GAAP, and those reported in the annual statements of the Company filed with
state insurance departments, which are prepared in accordance with statutory
accounting practices, were: $38 million, $37 million and $31 million for 1999,
1998 and 1997, respectively.

                                       20
<PAGE>   23
<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                         1989(a)   1990(a)   1991(a)   1992(a)   1993(a)   1994(a)    1995(a)
                                                               (Dollars in millions)
<S>                                     <C>       <C>       <C>       <C>       <C>       <C>        <C>
Reserves for Loss and Loss Adjustment
  Expense Originally Estimated:         $ 7,729   $ 8,022   $ 8,360   $ 8,955   $ 9,319   $ 9,712    $10,090
Cumulative amounts paid as of
One year later                            2,091     2,135     1,869     2,005     1,706     1,595      1,521
Two years later                           3,488     3,422     3,161     3,199     2,843     2,631      2,809
Three years later                         4,415     4,351     4,041     4,063     3,610     3,798      3,903
Four years later                          5,095     4,996     4,706     4,662     4,563     4,676      4,761
Five years later                          5,597     5,492     5,182     5,465     5,274     5,388
Six years later                           5,995     5,887     5,878     6,078     5,882
Seven years later                         6,333     6,466     6,421     6,618
Eight years later                         6,851     6,953     6,913
Nine years later                          7,287     7,408
Ten years later                           7,707

Reserves re-estimated as of
One year later                            7,832     8,128     8,362     9,058     9,270     9,486      9,848
Two years later                           7,929     8,197     8,637     9,139     9,234     9,310      9,785
Three years later                         8,077     8,592     8,906     9,183     9,108     9,395      9,789
Four years later                          8,560     9,003     9,026     9,189     9,271     9,427      9,735
Five years later                          8,991     9,159     9,123     9,405     9,298     9,463
Six years later                           9,189     9,295     9,367     9,440     9,349
Seven years later                         9,328     9,551     9,396     9,508
Eight years later                         9,592     9,586     9,477
Nine years later                          9,616     9,669
Ten years later                           9,706

Cumulative deficiency (redundancy)        1,977     1,647     1,117       553        30      (249)      (355)


Gross liability -- end of year                                                  $14,638   $15,013    $15,213
Reinsurance recoverables                                                          5,319     5,301      5,123
                                                                                ----------------------------

Net liability -- end of year                                                    $ 9,319   $ 9,712    $10,090
                                                                                ============================



Gross reestimated liability -- latest                                           $14,848   $15,196    $14,867

Reestimated reinsurance
   recoverables -- latest                                                         5,499     5,733      5,132
                                                                                ----------------------------

Net reestimated liability -- latest                                             $ 9,349   $ 9,463    $ 9,735
                                                                                ============================

Gross cumulative deficiency (redundancy)                                        $   210   $   183    $  (346)
                                                                                ============================
</TABLE>


<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                                   1996(b)   1997(b)   1998(b)   1999(b)
                                                           (Dollars in millions)
<S>                                               <C>       <C>       <C>       <C>
Reserves for Loss and Loss Adjustment
  Expense Originally Estimated:                   $21,816   $21,406   $20,763   $19,983
Cumulative amounts paid as of
One year later                                      3,704     4,025     4,159
Two years later                                     6,600     6,882
Three years later                                   8,841
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Ten years later

Reserves re-estimated as of
One year later                                     21,345    21,083    20,521
Two years later                                    21,160    20,697
Three years later                                  20,816
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Ten years later

Cumulative deficiency (redundancy)                 (1,000)     (709)     (242)


Gross liability -- end of year                    $30,969   $30,138   $29,411   $28,854
Reinsurance recoverables                            9,153     8,732     8,648     8,871
                                                  -------------------------------------

Net liability -- end of year                      $21,816   $21,406   $20,763   $19,983
                                                  =====================================


Gross reestimated liability -- latest             $30,067   $29,480   $29,290

Reestimated reinsurance
   recoverables -- latest                           9,251     8,783     8,769
                                                  ---------------------------
Net reestimated liability -- latest               $20,816   $20,697   $20,521
                                                  ===========================
Gross cumulative deficiency (redundancy)          $  (902)  $  (658)  $  (121)
                                                  ============================
</TABLE>

(a)   Reflects reserves of Travelers P&C, excluding Aetna P&C reserves which
      were acquired on April 2, 1996. Accordingly, the reserve development (net
      reserves for loss and loss adjustment expense recorded at the end of the
      year, as originally estimated, less net reserves reestimated as of
      subsequent years) relates only to losses recorded by Travelers P&C and
      does not include reserve development recorded by Aetna P&C.
(b)   Includes Aetna P&C gross reserves of $16,775 million and net reserves of
      $11,752 million acquired on April 2, 1996 and subsequent development
      recorded by Aetna P&C.

                                       21
<PAGE>   24
STATUTORY COMBINED RATIO INFORMATION

         The statutory combined ratio is an industry measurement of the results
of property and casualty insurance underwriting. This ratio is the sum of the
ratio of incurred losses and loss adjustment expenses to net premiums earned
(the "loss and LAE ratio"), the ratio of underwriting expenses incurred to net
premiums written (the "underwriting expense ratio") and, where applicable, the
ratio of dividends to policyholders to net premiums earned. A combined ratio
under 100% generally indicates an underwriting profit; a combined ratio over
100% generally indicates an underwriting loss. However, investment income,
federal income taxes and other non-underwriting income or expenses, such as
installment fee income, are not reflected in the statutory combined ratio. The
profitability of property and casualty insurance companies depends on income
from underwriting, investment and service operations. Lines of business where
claims are paid out over a longer period of time ("long-tail"), such as workers'
compensation, also provide investment income over a longer period of time and
therefore can be profitable at higher combined ratios than lines where claims
are paid out over a shorter period ("short-tail"). Insurers with a high
proportion of long-tail policies will generally have higher combined ratios than
insurers with more short-tail business.

         The ratios shown in the table below are computed based upon statutory
accounting practices, not generally accepted accounting principles ("GAAP"). For
information on GAAP combined ratios, see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

                            STATUTORY COMBINED RATIOS

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                       1999             1998              1997
<S>                                                   <C>              <C>               <C>
Commercial Lines:
   Loss and LAE ratio                                  77.9%            78.5%             78.4%
   Underwriting expense ratio                          30.7             29.7              30.6
   Combined ratio before
      policyholder dividends                          108.6(1)         108.2             109.0
   Combined ratio                                     109.7            109.1             111.0
Personal Lines:
   Loss and LAE ratio                                  70.0             66.7              63.5
   Underwriting expense ratio                          26.7             27.2              28.7
   Combined ratio                                      96.7             93.9              92.2
Total Company:
   Loss and LAE ratio                                  74.3             73.6              72.4
   Underwriting expense ratio                          28.8             28.6              29.9
   Combined ratio before
      policyholder dividends                          103.1(1)         102.2             102.3
   Combined ratio                                     103.7            102.7             103.5
</TABLE>

(1)   Includes the treatment of the commutation of an asbestos liability to an
      insured. Excluding the commutation, the Commercial Lines combined ratio
      before policyholder dividends and the Total TAP combined ratio before
      policyholder dividends were 106.1% and 101.8%, respectively.

                                       22
<PAGE>   25
ENVIRONMENTAL, ASBESTOS AND OTHER CUMULATIVE INJURY CLAIMS

         Environmental, asbestos and other cumulative injury claims are
segregated from other claims and are handled separately by the Company's Special
Liability Group, a special unit staffed by dedicated legal, claim, finance and
engineering professionals. For additional information on environmental, asbestos
and other cumulative injury claims, see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

INSURANCE POOLS

         Most of the Company's insurance subsidiaries are members of one of two
separate intercompany property and casualty reinsurance pooling arrangements:
the Travelers Property Casualty pool and the Gulf pool. Each of these insurance
pools permits the participating companies to rely on the capacity of the entire
pool rather than just on its own capital and surplus. Under the arrangements of
each insurance pool, the members share substantially all insurance business that
is written and allocate the combined premiums, losses and expenses. Travelers
Casualty and Surety Company of America ("Travelers C&S of America") does not
participate in either pool and is dedicated to the Bond Specialty business.

RATINGS

         Insurance companies are rated by rating agencies to provide both
industry participants and insurance consumers with meaningful information on
specific insurance companies. Higher ratings generally indicate financial
stability and a strong ability to pay claims. These ratings are based upon
factors relevant to policyholders and are not directed toward protection of
investors. Such ratings are neither a rating of securities nor a recommendation
to buy, hold or sell any security and may be revised or withdrawn at any time.
Ratings focus primarily on the following factors: capital resources, financial
strength, demonstrated management expertise in the insurance business, credit
analysis, systems development, market segment position and growth opportunities,
marketing, sales conduct practices, investment operations, minimum
policyholders' surplus requirements and capital sufficiency to meet projected
growth, as well as access to such traditional capital as may be necessary to
continue to meet standards for capital adequacy.

         The following table summarizes the current claims-paying and financial
strength ratings of the Company's property-casualty insurance pools and
Travelers C&S of America by A. M. Best, Duff & Phelps Corp. ("Duff & Phelps"),
Moody's Investor's Service Inc. ("Moody's") and Standard & Poor's Ratings Group
("Standard & Poor's"). The table also presents the position of each rating in
the applicable agency's rating scale.

<TABLE>
<CAPTION>
                                                                                                      STANDARD &
                                              A.M. BEST        DUFF & PHELPS         MOODY'S            POOR'S
<S>                                       <C>                 <C>               <C>                   <C>
Travelers Property Casualty pool (1)       A+ (2nd of 15)     AA (3rd of 18)    Aa3 (4th of 19)       AA- (4th of 17)
Gulf pool (2)                              A+ (2nd of 15)          --                 --              AA  (3rd of 17)
Travelers C&S of America                   A+ (2nd of 15)     AA (3rd of 18)    Aa3 (4th of 19)       AA- (4th of 17)
</TABLE>

---------------------
(1)   The Travelers Property Casualty pool consists of The Travelers Indemnity
      Company, Travelers Casualty and Surety Company, The Phoenix Insurance
      Company, The Standard Fire Insurance Company, Travelers Casualty and
      Surety Company of Illinois, Farmington Casualty Company, The Travelers
      Indemnity Company

                                       23
<PAGE>   26
      of Connecticut, The Automobile Insurance Company of Hartford, Connecticut,
      The Charter Oak Fire Insurance Company, The Travelers Indemnity Company of
      America, The Travelers Indemnity Company of Missouri, Travelers Casualty
      Company of Connecticut, Travelers Commercial Insurance Company, The
      Travelers Indemnity Company of Illinois, Travelers Property Casualty
      Insurance Company, TravCo Insurance Company, The Travelers Home and Marine
      Insurance Company, Travelers Personal Security Insurance Company,
      Travelers Property Casualty Insurance Company of Illinois and Travelers
      Excess and Surplus Lines Company.

(2)   The Gulf pool consists of Gulf Insurance Company, Gulf Insurance Company
      U.K. Limited, Gulf Underwriters Insurance Company, Select Insurance
      Company, Atlantic Insurance Company and Gulf Group Lloyds.

INVESTMENTS

         Insurance company investments must comply with applicable laws and
regulations which prescribe the kind, quality and concentration of investments.
In general, these laws and regulations permit investments, within specified
limits and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common equity securities, mortgage
loans, real estate and certain other investments.

         At December 31, 1999, the carrying value of the Company's investment
portfolio was $29.8 billion, of which 90.0% was invested in fixed maturity
investments and short-term investments (of which 43% was invested in federal,
state or municipal government obligations), 1.7% in mortgage loans and real
estate held for sale, 4.2% in common stocks and other equity securities and 4.1%
in other investments. The average duration of the fixed maturity portfolio,
including short-term investments, was 5.4 years at such date. Non-investment
grade securities totaled approximately $1.5 billion, representing approximately
5.9% of the Company's fixed maturity investment portfolio as of December 31,
1999.

         The following table sets forth information regarding the investments of
the Company. It reflects the average amount of investments, net investment
income earned and the yield thereon for the years ended December 31, 1999, 1998
and 1997. See Note 4 of Notes to Consolidated Financial Statements and the
discussion of Investment Portfolio in Item 7 of this Form 10-K for information
regarding the investment portfolio of the Company.

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                           1999                  1998                   1997
                                                                         (Dollars in millions)
<S>                                                     <C>                   <C>                       <C>
Average investments                                     $30,860.8             $31,458.5                 $30,197.7
Net investment income                                   $ 2,091.8              $2,100.0                 $ 2,050.8
Average yield (1)                                            7.2%                 7.4%                      7.4%
Average tax equivalent yield (1)                             8.0%                 8.2%                      8.0%
</TABLE>

---------------------
(1)      Excluding realized and unrealized investment gains and losses.

         DERIVATIVES

         See Note 12 of Notes to Consolidated Financial Statements for a
discussion of the policies and transactions related to derivatives of the
Company.

                                       24
<PAGE>   27
COMPETITION

         The property and casualty insurance industry is highly competitive in
the areas of price, service, product offerings, agent relationships and, in the
case of personal property and casualty business, method of distribution (i.e.,
use of independent agents, exclusive agents and/or salaried employees).
According to A.M. Best, there are approximately 1,100 property-casualty
organizations in the United States, comprised of approximately 2,500
property-casualty companies. Of those organizations, the top 200 account for
approximately 90% of the consolidated industry's total net written premiums. In
addition, an increasing amount of commercial risks are covered through the use
of alternative risk management techniques such as self-insured retentions, large
deductibles, risk-purchasing groups, risk-retention groups and captives.

         COMMERCIAL LINES. The insurance industry is represented in the
commercial lines marketplace by many insurance companies of varying size as well
as other entities offering risk alternatives such as self-insured retentions or
captive programs. Market competition works to set the price charged for
insurance products and the level of service provided within the insurance
regulatory framework. Growth is driven by a company's ability to provide
insurance and services at a price that is reasonable and acceptable to the
customer. In addition, the marketplace is affected by available capacity of the
insurance industry as measured by policyholders' surplus. Surplus expands and
contracts primarily in conjunction with profit levels generated by the industry.
Growth in premium and service business is also measured by a company's ability
to retain existing customers and to attract new customers.

         The National Accounts market is highly competitive and its business is
typically written through national brokers and, to a lesser extent, regional
brokers. Insurance companies compete in this market based on price, product
offerings, claim and loss prevention services, managed care cost containment,
and risk management information systems. National Accounts also offers a large
nationwide network of localized claim service centers which provide greater
flexibility in claims adjusting and allows the Company to more quickly respond
to the needs of its customers. The Company's Alternative Market business also
competes for state contracts to provide claims and policy management services.
These contracts, which generally have three-year terms, are selected by state
agencies through a bid process based on the quality of service and price. The
Company services approximately 30% of the total workers' compensation assigned
risk market, making it one of the largest servicing insurers in the industry.

         The Commercial Accounts market is highly competitive. Commercial
Accounts business has historically been written through independent agents and
brokers, although some companies use direct writing. Competitors in this market
are primarily national property-casualty insurance companies willing to write
most classes of business using traditional products and pricing and, to a lesser
extent, regional insurance companies and companies that have developed niche
programs for specific industry segments. Companies compete on price, product
offerings, response time in policy issuance and claim and loss prevention
services. Additionally, reduced overhead and improved efficiency through
automation and response time to customer needs are key to success in this
market. The construction business has become a focused industry market for
several large insurance companies. Construction market business is written
through agents and brokers. Insurance companies compete in this market based
upon price, product offering and claim and

                                       25
<PAGE>   28
risk management service. The Company utilizes its specialized underwriters,
engineers, and claim handlers, who have extensive experience and knowledge of
the construction industry, to work with customers, agents and brokers to compete
effectively in this market.

         The Select Accounts market is highly competitive and is typically
written through independent agents and, to a lesser extent, regional brokers.
Both national and regional property-casualty insurance companies compete in the
Select Accounts market which is generally comprised of lower risk, "main street"
business customers. Risks are underwritten and priced using standard industry
practices and a combination of proprietary and standard industry product
offerings. Competition in this market is primarily based on price, product
offerings and response time in policy services. The Company has established a
strong marketing relationship with its distribution network and has provided it
with defined underwriting policies, competitive prices and efficient automated
environments. In addition, the Company has established a centralized service
center to help agents perform many back-office functions, in return for a fee.

         The market in which Specialty Accounts competes includes small to
mid-size niche companies that target certain lines of insurance and larger,
multi-line companies that focus on various segments of the Specialty Accounts
market. Specialty Accounts business is generally written through wholesale
brokers and retail agents and brokers throughout the United States. Gulf
Specialty derives a competitive advantage through its underwriting practices,
claim-handling expertise, low expense levels and broad product offering base.
Bond Specialty's reputation for timely decision-making, a nationwide network of
local underwriting and industry experts and strong producer and customer
relationships as well as its ability to offer its customers a full range of
financial services products, enable it to compete effectively. Its ability to
cross-sell Bond Specialty products to customers of National Accounts, Commercial
Accounts, Select Accounts, Personal Lines and through other Citigroup units
provides further competitive advantages for the Company.

         PERSONAL LINES. Personal lines insurance is written by hundreds of
insurance companies of varying sizes. Although national companies write the
majority of the business, the Company also faces competition from local or
regional companies which often have a competitive advantage because of their
knowledge of the local marketplace and their relationship with local agents. The
Company believes that the principal competitive factors are price, service,
perceived stability of the insurer and name recognition. The Company also
competes for business within each of the independent agencies representing it,
because these agencies also offer policies of competing independent agency
companies. At the agency level, the Company believes that competition is
primarily based on price and the level of service, including claims handling, as
well as the level of automation and the development of long-term relationships
with individual agents. The Company also competes with insurance companies that
use captive agents or salaried employees to sell their products. Because these
companies generally pay lower commissions than independent agency companies,
they may be able to generate business at a lower cost than the Company. Due to
this expense advantage, direct writing companies have gradually expanded their
market share in recent years. However, in addition to its traditional
independent agency distribution, Personal Lines has broadened its distribution
of Personal Lines products to include marketing to sponsoring organizations
including employee and affinity groups, establishment of joint marketing
arrangements with other insurers and cross-marketing to Citibank customers. The
Company believes that its continued focus on expense management

                                       26
<PAGE>   29
practices enables it to price its products competitively in all of its
distribution channels. The personal auto insurance marketplace has continued to
be more competitive in 1999 as some personal auto carriers have reduced prices
in selected markets. This trend is expected to continue in 2000.

REGULATION

         STATE REGULATION

         The Company's insurance subsidiaries are subject to regulation in the
various states and jurisdictions in which they transact business. The extent of
regulation varies but generally has its source in statutes that delegate
regulatory, supervisory and administrative authority to a department of
insurance in each state. The regulation, supervision and administration relate,
among other things, to the standards of solvency that must be met and
maintained, the licensing of insurers and their agents, the nature of and
limitations on investments, premium rates, restrictions on the size of risks
that may be insured under a single policy, reserves and provisions for unearned
premiums, losses and other obligations, deposits of securities for the benefit
of policyholders, approval of policy forms and the regulation of market conduct
including the use of credit information in underwriting as well as other
underwriting and claims practices. In addition, many states have enacted
variations of competitive rate-making laws which allow insurers to set certain
premium rates for certain classes of insurance without having to obtain the
prior approval of the state insurance department. State insurance departments
also conduct periodic examinations of the affairs of insurance companies and
require the filing of annual and other reports relating to the financial
condition of companies and other matters.

         At the present time, the Company's insurance subsidiaries are
collectively licensed to transact insurance business in all states, the District
of Columbia, Guam, Puerto Rico, Bermuda, and the U.S. Virgin Islands, as well as
Canada and the United Kingdom.

         Although the holding company, Travelers Property Casualty Corp., is not
regulated as an insurance company, it is the owner of the capital stock of its
insurance subsidiaries and as such is subject to state insurance holding company
statutes, as well as certain other laws, of each of the states of domicile of
its insurance subsidiaries. All holding company statutes, as well as certain
other laws, require disclosure and, in some instances, prior approval of
material transactions between an insurance company and an affiliate. The holding
company statutes, as well as certain other laws, also require, among other
things, prior approval of an acquisition of control of a domestic insurer and
the payment of extraordinary dividends or distributions.

         The Company's principal insurance subsidiaries are domiciled in the
State of Connecticut. The insurance holding company law of Connecticut requires
notice to, and approval by, the state insurance commissioner 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 income for the twelve-month period ending 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

                                       27
<PAGE>   30
subsidiaries are domiciled generally contain similar (although in certain
instances somewhat more restrictive) limitations on the payment of dividends.
Dividend payments to the Company from its insurance subsidiaries are limited to
$1.2 billion in 2000 without prior approval of the Connecticut Insurance
Department.

         Virtually all states require insurers licensed to do business in their
state to bear a portion of the loss suffered by certain insureds as a result of
the insolvency of other insurers. Depending upon state law, insurers can be
assessed an amount that is generally equal to between 1% and 2% of premiums
written for the relevant lines of insurance in that state each year to pay the
claims of an insolvent insurer. Most of these payments are recoverable through
premium rates, premium tax credits or policy surcharges. Significant increases
in assessments could limit the ability of the Company's insurance subsidiaries
to recover such assessments through tax credits. In addition, there have been
some legislative efforts to limit or repeal the tax offset provisions, which
efforts, to date, have been generally unsuccessful. These assessments may
increase or decrease in the future depending upon the rate of insolvencies of
insurance companies.

         The Company's insurance subsidiaries are also required to participate
in various involuntary assigned risk pools, principally involving workers'
compensation and automobile insurance, which provide various insurance coverages
to individuals or other entities that otherwise are unable to purchase such
coverage in the voluntary market. Participation in these pools in most states is
generally in proportion to voluntary writings of related lines of business in
that state. Combined earned premiums related to such pools and assigned risks
for the Company were $134 million, $176 million and $226 million in 1999, 1998
and 1997, respectively. The related combined underwriting losses for the Company
were $20 million, $19 million and $16 million in 1999, 1998 and 1997,
respectively.

         Proposed legislation and regulatory changes have been introduced in the
states from time to time that would modify certain laws and regulations
affecting the financial services industry, including the use of information. The
potential impact of such legislation on the Company's businesses cannot be
predicted at this time.

         INSURANCE REGULATIONS CONCERNING CHANGE OF CONTROL

         Many state insurance regulatory laws intended primarily for the
protection of policyholders contain provisions that require advance approval by
state agencies of any change in control of an insurance company that is
domiciled (or, in some cases, having such substantial business that it is deemed
to be commercially domiciled) in that state. The Company owns, directly or
indirectly, all of the shares of stock of certain property and casualty
insurance companies domiciled in the States of California, Connecticut, Florida,
Illinois, Massachusetts, Missouri, New Jersey and Texas. "Control" is generally
presumed to exist through the ownership of 10% or more of the voting securities
of a domestic insurance company or of any company that controls a domestic
insurance company. Any purchaser of shares of Common Stock representing 10% or
more of the voting power of the Company will be presumed to have acquired
control of the Company's domestic insurance subsidiaries unless, following
application by such purchaser in each insurance subsidiary's state of domicile,
the relevant Insurance Commissioner determines otherwise. In addition, many
state insurance regulatory laws contain provisions that require prenotification
to state agencies of a

                                       28
<PAGE>   31
change in control of a nondomestic admitted insurance company in that state.
While such prenotification statutes do not authorize the state agency to
disapprove the change of control, such statutes do authorize issuance of a cease
and desist order with respect to the nondomestic admitted insurer if certain
conditions exist such as undue market concentration. Any future transactions
that would constitute a change in control of the Company would generally require
prior approval by the insurance departments of the states in which the Company's
insurance subsidiaries are domiciled or commercially domiciled and may require
preacquisition notification in those states that have adopted preacquisition
notification provisions and in which such insurance subsidiaries are admitted to
transact business.

         Two subsidiaries of the Company are domiciled in the United Kingdom.
Insurers in the United Kingdom are subject to certain change of control
restrictions in the Insurance Companies Act of 1982 which require the approval
of The Department of Trade and Industry if any person is to become a
"controller" (which is defined as a person entitled to exercise control of 15%
or more of the voting power) of an authorized insurance company.

         Certain other insurance subsidiaries of the Company are domiciled in,
or authorized to conduct insurance business in Canada. Authorized insurers in
Canada are subject to certain change of control restrictions in Section 407 of
the Insurance Companies Act, which requires the approval of the Minister of
Finance if any person acquires a "significant interest" (beneficial ownership,
directly or through one or more entities controlled by such person, of 10% of
the outstanding shares of such Company) in an authorized insurance company.

         Such requirements may deter, delay or prevent certain transactions
affecting the control of or the ownership of common stock, including
transactions that could be advantageous to the stockholders of the Company.

         INSURANCE REGULATORY INFORMATION SYSTEM

         The 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 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 of four or more of the ratios. In
normal years, 15% of the companies included in the IRIS system are expected by
the NAIC to be outside the usual range on four or more ratios.

                                       29
<PAGE>   32
         In each of the last three years, certain of the Company's insurance
subsidiaries have been outside of the usual range for certain IRIS ratios. In
all such instances, the regulators have been satisfied upon follow-up that there
is no solvency problem. It is possible that similar events could occur this
year, and management believes that the resolution would be the same. No
regulatory action has been taken by any state insurance department or the NAIC
with respect to IRIS ratios of any of the Company's insurance subsidiaries for
the three years ended December 31, 1999.

         For 1999 and 1998, Travelers Indemnity, the lead company for the
Travelers Property Casualty pool, had no values outside the usual range for all
IRIS ratios. For 1997, Travelers Indemnity was outside the usual range for the
liabilities to liquid assets ratio. Travelers Indemnity is also the ultimate
parent of 19 insurance companies and several other non-insurance entities. As a
result, this ratio is distorted because all of the liabilities are included in
the calculation while Travelers Indemnity's significant investment in
affiliates, which increased in 1997, is excluded from liquid assets.

         The following table sets forth information regarding the premium to
surplus ratios of the Company.


             SCHEDULE OF PREMIUM TO SURPLUS RATIOS (STATUTORY BASIS)

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                 1999        1998         1997
                                                 ----        ----         ----
                                                     (Dollars in millions)
<S>                                             <C>         <C>          <C>
Net written premiums                            $8,213      $8,104       $7,832
Capital and surplus                              7,656       7,079        6,188
Ratio of net written premiums to capital
   and surplus                                    1.07x       1.14x        1.27x
</TABLE>

         RISK-BASED CAPITAL (RBC) REQUIREMENTS

         In order to enhance the regulation of insurer solvency, the NAIC has
adopted a formula and model law to implement RBC requirements for most property
and casualty insurance companies, which is designed to assess minimum capital
requirements and to raise the level of protection that statutory surplus
provides for policyholder obligations. The RBC formula for property and casualty
insurance companies measures four major areas of risk facing property and
casualty insurers: (i) underwriting, which encompasses the risk of adverse loss
developments and inadequate pricing; (ii) declines in asset values arising from
credit risk; (iii) declines in asset values arising from investment risks; and
(iv) off-balance sheet risk arising from adverse experience from non-controlled
assets, guarantees for affiliates or other contingent liabilities and reserve
and premium growth. Pursuant to the law adopted by the states, insurers having
less statutory surplus than that required by the RBC calculation will be subject
to varying degrees of regulatory action, depending on the level of capital
inadequacy.

         The RBC law provides for four levels of regulatory action. The extent
of regulatory intervention and action increases as the level of surplus to RBC
falls. The first level, the Company Action Level (as defined by the NAIC),
requires an insurer to submit a plan of corrective actions to the regulator if
surplus falls below 200% of the RBC amount. The

                                       30
<PAGE>   33
Regulatory Action Level (as defined by the NAIC) requires an insurer to submit a
plan containing corrective actions and permits the relevant Insurance
Commissioner to perform an examination or other analysis and issue a corrective
order if surplus falls below 150% of the RBC amount. The Authorized Control
Level (as defined by the NAIC) authorizes the relevant Insurance Commissioner to
take whatever regulatory actions 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 surplus falls below 100% of the RBC
amount. The fourth action level is the Mandatory Control Level (as defined by
the NAIC) which authorizes the relevant Insurance Commissioner to rehabilitate
or liquidate the insurer if surplus 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 formulas to rate or to rank such
companies. At December 31, 1999, all of the Company's property-casualty
insurance companies had adjusted capital in excess of amounts requiring company
or regulatory action at any of the four levels.

         FEDERAL REGULATION

         Citigroup is a bank holding company subject to the provisions of the
Bank Holding Company Act of 1956 (the "BHCA"). For a discussion of the BHCA and
its application to the Company, see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and Note 2 of Notes
to Consolidated Financial Statements.

         Although the federal government does not directly regulate the business
of insurance, other than flood insurance, federal initiatives often have an
impact on the insurance industry. Legislation has been introduced in Congress
during the past several sessions that, if enacted, would result in substantially
greater federal regulation of the insurance business. Current and proposed
federal measures that may affect the property and casualty industry may include:
possible changes to the tax laws governing property and casualty insurance
companies; proposals regarding natural disaster protection, tort reform
(including limits to product liability lawsuits) and the use of credit history;
and the enforcement of territorial underwriting in Personal Lines.

         The Gramm-Leach-Bliley Act passed in November 1999 included the most
extensive consumer privacy provisions ever enacted by Congress. These
provisions, among other things, require full disclosure of the Company's privacy
policy to consumers and mandate offering the customer the ability to opt out of
having customer information disclosed to third parties. In addition, these
provisions require the federal banking regulators to adopt privacy regulations
and permit the states to adopt more extensive privacy protections through
legislation or regulation. There can be no assurance whether any such
legislation or regulation will place additional limitations on the Company's
operations or adversely affect its earnings.

         President Clinton's recent budget proposal (the "Budget Proposal")
contains a number of tax provisions that could adversely impact the Company,
including a provision relating to tax-exempt interest obligations. The Budget
Proposal, which is in its early stages of consideration,


                                       31
<PAGE>   34
has not yet been introduced as part of any legislation in Congress.

         It is not possible to predict whether any of the proposed legislation
discussed above will be enacted, what form such legislation might take when
enacted, or the potential effects of such legislation on the Company and its
competitors.

INTEREST EXPENSE AND OTHER

         Interest Expense and Other consists primarily of financing costs
associated with the Acquisition.

OTHER INFORMATION

         GENERAL BUSINESS FACTORS

         In the judgment of the Company, no material part of the business of the
Company and its subsidiaries is dependent upon a single customer or group of
customers, the loss of any one of which would have a materially adverse effect
on the Company, and no one customer or group of affiliated customers accounts
for as much as 10% of the Company's consolidated revenues.

         At December 31, 1999, the Company had approximately 19,609 full-time
and 685 part-time employees. The Company believes that its employee relations
are satisfactory. None of the Company's employees is subject to collective
bargaining agreements.

         SOURCE OF FUNDS

         For a discussion of the Company's sources of funds and maturities of
the long-term debt of the Company, see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources," and Note 7 of Notes to Consolidated Financial Statements.

         TAXATION

         For a discussion of tax matters affecting the Company and its
operations, see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and Note 8 of Notes to Consolidated
Financial Statements.

         FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

         For financial information regarding industry segments of the Company,
see Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and Note 3 of Notes to Consolidated Financial
Statements.

         RECENT TRANSACTION

         On February 29, 2000, the Company announced that it had signed a letter
of intent to acquire the surety business of Reliance Group Holdings, Inc. for
$580 million.
                                       32
<PAGE>   35


         EXECUTIVE OFFICERS OF THE COMPANY

         The current executive officers of the Company are indicated below. Ages
are given as of March 3, 2000.
<TABLE>
<CAPTION>
                                                                                                         OFFICER
NAME                                AGE       POSITIONS                                                   SINCE
----                                ---       ---------                                                   -----

<S>                                 <C>       <C>                                                        <C>
Jay S. Fishman                      47        President and Chief Executive Officer                        1996
Charles J. Clarke                   64        Vice Chairman; Chairman - Commercial                         1996
                                                 Lines
J. David Gibbs                      45        President and Chief Executive Officer -                      1999
                                                 Claim Services
Anil "Bob" Khanna                   43        Chief Executive Officer - Personal Lines                     1998
Joseph P. Kiernan                   59        Chairman and Chief Executive Officer -                       1996
                                                 Bond Specialty
Douglas G. Elliot                   39        Chief Operating Officer - Commercial Lines                   1999
Ronald E. Foley                     54        Chairman and Chief Executive Officer -                       1996
                                                 Risk Management
William P. Hannon                   51        Chief Financial Officer                                      1996
James M. Michener                   47        Senior Vice President, General Counsel and                   1996
                                                 Secretary
Douglas K. Russell                  42        Vice President and Chief Accounting                          1999
                                                 Officer
</TABLE>

         Mr. Fishman was named President and Chief Executive Officer of the
Company in October 1998. Since January 1998 he has also served as Chief
Executive Officer of Commercial Lines, and from October 1996 through October
1998 he also served as President of Commercial Lines. From October 1996 through
January 1998, he also served as Chief Operating Officer of Commercial Lines. Mr.
Fishman was Vice Chairman of the Company from January 1996 through October 1998,
and from January 1996 through January 1998 he was the Chief Administrative
Officer of the Company. Mr. Fishman has also served as Vice Chairman of TIGI
since September 1995, and has been Chief Financial Officer and Chief
Administrative Officer of that Company since December 1993 and June 1996,
respectively. Mr. Fishman was a Senior Vice President of Travelers Group from
October 1991 through October 1998, and Treasurer of Travelers Group from 1991 to
December 1993. From 1989 to 1991, he held various other positions with Travelers
Group and its subsidiaries.

         Mr. Clarke was named Vice Chairman of the Company in January 1998. He
has been Chairman of Commercial Lines since 1990. He has been employed in such
positions or other executive or management positions with the Company or its
affiliates for more than the past five years.

         Mr. Gibbs has been President and Chief Executive Officer, Claim
Services, of the Company since 1998 and was Executive Vice President responsible
for the Field Services Division of the Company from 1996 through 1998. Prior to
joining the Company, Mr. Gibbs served as Senior Vice President, Product Services
and Regulation of American International

                                       33
<PAGE>   36
Group's Domestic Brokerage Group. Mr. Gibbs had served in several positions at
American International Group since 1990.

         Mr. Khanna has been Executive Vice President and Chief Executive
Officer - Personal Lines of the Company since October 1998. He was, from 1986 to
1998, a Senior Vice President of Citibank, N.A. From 1982 until 1986, he was
Engagement Manager at McKinsey & Co.

         Mr. Kiernan has been Chairman and Chief Executive Officer - Bond
Specialty of the Company since March 1996. From 1989 to March 1996, Mr. Kiernan
was Vice President of Aetna's bond business and has worked in the bond business
lines at Aetna since 1963. From June 1995 to March 1996, Mr. Kiernan was Vice
President of Standard Commercial Accounts of Aetna.

         Mr. Elliot has been Chief Operating Officer for Commercial Lines of the
Company since 1999. He has been employed in such position or other executive or
management positions with the Company or its predecessors for more than the past
five years.

         Mr. Foley has been Chairman and Chief Executive Officer - Risk
Management of the Company since January 1996. He has been employed in such
positions or other executive or management positions with the Company or its
affiliates for more than the past five years.

         Mr. Hannon has been Chief Financial Officer of the Company since
January 1996. Prior to joining the Company, Mr. Hannon served as Deputy Managing
Partner of the Financial Services practice of KPMG LLP, which he joined in 1969,
and also served as a member of the firm's Securities and Exchange Commission
reviewing partner's committee.

         Mr. Michener has been Senior Vice President, General Counsel and
Secretary of the Company since July 1996. Prior to joining the Company, Mr.
Michener was General Counsel of The MetraHealth Companies, Inc. from January
1995 to October 1995 and Deputy General Counsel of United HealthCare Corporation
from October 1995 to May 1996. From August 1977 to December 1994, Mr. Michener
served in several positions at TIGI.

         Mr. Russell has been Vice President and Controller and Chief Accounting
Officer of the Company of the Company since July 1999. Mr. Russell has served in
several positions at the Company since January 1997. Prior to joining the
Company, Mr. Russell was Director of Financial Reporting of both The MetraHealth
Companies, Inc. from May 1995 to October 1995 and of United HealthCare
Corporation from October 1995 to December 1996. From 1979 to May 1995, Mr.
Russell served in several positions at Ernst & Young LLP.

                                       34
<PAGE>   37
GLOSSARY OF INSURANCE TERMS

<TABLE>
<CAPTION>


<S>                                     <C>
Accident year........................   The annual accounting period in which loss events occurred, regardless of
                                        when the losses are actually reported, booked or paid.

Adjusted unassigned surplus..........   Unassigned surplus as of the most recent statutory annual report reduced
                                        by twenty-five percent of that year's unrealized appreciation in value or
                                        revaluation of assets or unrealized profits on investments, as defined in
                                        such report.

Admitted insurer.....................   A company licensed to transact insurance business within a state.

Alternative market...................   The segment of the insurance market which has developed in response to
                                        volatility in cost and availability of traditional commercial insurance
                                        coverage and consists of various risk financing mechanisms, including
                                        self insurance, captive insurance companies, risk retention groups and
                                        residual market business.

Annuity..............................   A contract that pays a periodic benefit for the life of a person (the
                                        annuitant), the lives of two or more persons or for a specified period of
                                        time.

Assigned risk pools..................   Reinsurance pools which cover risks for those unable to purchase
                                        insurance in the voluntary market because the risk is too great or rate
                                        inadequacy has reduced the supply of insurance.  The costs of the risks
                                        associated with these pools are charged back to insurance carriers in
                                        proportion to their direct writings.

Assumed reinsurance..................   Insurance risks acquired from a ceding company.

Assumption reinsurance...............   A transaction whereby the ceding company transfers its entire obligation
                                        under the policy to the reinsurer, who becomes directly liable to the
                                        policyholder in all respects, including collecting premiums and paying
                                        benefits.  See "Reinsurance."

Attachment point.....................   The amount of losses above which excess of loss reinsurance becomes
                                        operative.

Broker...............................   One who negotiates contracts of insurance or reinsurance on behalf of an
                                        insured party, receiving a commission from the insurer or reinsurer for
                                        placement and other services rendered.
</TABLE>


                                       35
<PAGE>   38

<TABLE>
<CAPTION>
<S>                                     <C>
Capacity.............................   The percentage of surplus, or the dollar amount of exposure, that an
                                        insurer or reinsurer is willing or able to place at risk.  Capacity may
                                        apply to a single risk, a program, a line of business or an entire book
                                        of business. Capacity may be constrained by legal restrictions, corporate
                                        restrictions or indirect restrictions.

Captive company......................   An insurance company formed to insure the risks of its parent entity or
                                        entities.

Case reserves........................   Loss reserves, established with respect to specific, individual reported
                                        claims.

Casualty insurance...................   Insurance which is primarily concerned with the losses caused by injuries
                                        to third persons (i.e., not the insured) and the legal liability imposed
                                        on the insured resulting therefrom.  It includes, but is not limited to,
                                        employers' liability, workers' compensation, public liability, automobile
                                        liability, personal liability and aviation liability insurance.  It
                                        excludes certain types of losses that by law or custom are considered as
                                        being exclusively within the scope of other types of insurance, such as
                                        fire or marine.

Catastrophe..........................   A severe loss, usually involving risks such as fire, earthquake,
                                        windstorm, explosion and other similar events.

Catastrophe loss.....................   Loss and directly identified loss adjustment expenses from catastrophes.

Catastrophe reinsurance..............   A form of excess of loss property reinsurance which, subject to a
                                        specified limit, indemnifies the ceding company for the amount of loss in
                                        excess of a specified retention with respect to an accumulation of losses
                                        resulting from a catastrophic event.  The actual reinsurance document is
                                        called a "catastrophe cover."

Cede; ceding company.................   When an insurer reinsures its liability with another insurer (a
                                        "cession"), it "cedes" business and is referred to as the "ceding
                                        company."

Ceded reinsurance....................   Insurance risks transferred to another company as reinsurance.  See
                                        "Reinsurance."

Claim................................   Request by an insured for indemnification by an insurance company for
                                        loss incurred from an insured peril.

Claim adjustment expenses............   See "Loss adjustment expenses."
</TABLE>

                                       36
<PAGE>   39

<TABLE>
<CAPTION>


<S>                                     <C>
Claims and claim adjustment
       expenses......................   See "Loss and loss adjustment expenses."

Claims and claim adjustment
       expense reserves..............   See "Loss reserves."

Clash agreement......................   An excess of loss agreement with a retention higher than the limits on
                                        any one reinsured policy.  The agreement is thus only exposed to loss
                                        when two or more policies (perhaps from different lines of business) are
                                        involved in a common occurrence in an amount greater than the clash
                                        agreement retention.  Also known as contingency cover.

Combined ratio.......................   The sum of the loss and LAE ratio, the underwriting expense ratio and,
                                        where applicable, the ratio of dividends to policyholders to net premiums
                                        earned.  A combined ratio under 100% generally indicates an underwriting
                                        profit.  A combined ratio over 100% generally indicates an underwriting
                                        loss.

Commercial lines.....................   The various kinds of property and casualty insurance that are written for
                                        businesses.
Commercial multi-peril
       policies .....................   Refers to policies which cover both property and third party liability
                                        exposures.

Commutation agreement................   An agreement between a reinsurer and a ceding company whereby the
                                        reinsurer pays an agreed upon amount in exchange for a complete discharge
                                        of all obligations, including future obligations, between the parties for
                                        reinsurance losses incurred.

Deductible...........................   The amount of loss that an insured retains.

Deferred acquisition costs...........   Primarily commissions and premium taxes, which vary with and are
                                        primarily related to the production of new business, are deferred and
                                        amortized to achieve a matching of revenues and expenses when reported in
                                        financial statements prepared in accordance with GAAP.

Direct written premiums..............   The amounts charged by a primary insurer to insureds in exchange for
                                        coverages provided in accordance with the terms of an insurance contract.

Earned premiums or premiums
       earned........................   That portion of property-casualty premiums written that applies to the
                                        expired portion of the policy term.  Earned premiums are recognized as
                                        revenues under both SAP and GAAP.
</TABLE>

                                       37
<PAGE>   40

<TABLE>
<CAPTION>
<S>                                     <C>

Excess liability.....................   Additional casualty coverage above a layer of insurance exposures.

Excess of loss reinsurance...........   Reinsurance that indemnifies the reinsured against all or a specified
                                        portion of losses under a specified dollar amount or "retention."

Expense ratio........................   See "Underwriting expense ratio."

Extra contractual obligations........   Amounts incurred by an insurer, beyond those that would have been
                                        incurred as specified in the insurance agreement with an insured, due to
                                        monetary awards required by a court of law against the insurer for its
                                        negligence to or bad faith in dealing with its insured.

Facultative reinsurance..............   The reinsurance of all or a portion of the insurance provided by a single
                                        policy.  Each policy reinsured is separately negotiated.

Fidelity and surety programs.........   Insurance which guarantees performance of an obligation or indemnifies
                                        for loss due to embezzlement or wrongful abstraction of money, securities
                                        or other property.

Guaranteed cost products.............   An insurance policy where the premiums charged will not be adjusted for
                                        actual loss experience during the covered period.

Guaranty fund........................   State-regulated mechanism which is financed by assessing insurers doing
                                        business in those states.  Should insolvencies occur, these funds are
                                        available to meet some or all of the insolvent insurer's obligations to
                                        policyholders.

Incurred but not reported
       ("IBNR") reserves.............   Reserves for estimated losses and LAE that have been incurred but not yet
                                        reported to the insurer.

Indemnity reinsurance................   A transaction whereby the reinsurer agrees to indemnify the ceding
                                        company against all or part of the loss that the latter may sustain under
                                        the policies it issued that are being reinsured.  The ceding company
                                        remains primarily liable as the direct insurer on all risks ceded.  See
                                        "Reinsurance."

Inland marine........................   A broad type of insurance generally covering articles that may be
                                        transported from one place to another, as well as bridges, tunnels and
                                        other instrumentalities of transportation.  It includes goods in transit
                                        (generally other than transoceanic) and may include policies for movable
                                        objects such as personal effects, personal property, jewelry, furs, fine
                                        art and others.
</TABLE>

                                       38
<PAGE>   41

<TABLE>
<CAPTION>
<S>                                     <C>

IRIS ratios..........................   Financial ratios calculated by the NAIC to assist state insurance
                                        departments in monitoring the financial condition of insurance
                                        companies.

Large deductible policy..............   An insurance policy where the customer assumes at least $25,000 or more
                                        of each loss.

Loss.................................   An occurrence that is the basis for submission and/or payment of a
                                        claim.  Losses may be covered, limited or excluded from coverage,
                                        depending on the terms of the policy.

Loss adjustment expenses
       ("LAE").......................   The expenses of settling claims, including legal and other fees and the
                                        portion of general expenses allocated to claim settlement costs.

Loss and LAE ratio...................   For SAP it is the ratio of incurred losses and loss adjustment expenses
                                        to net earned premiums.  For GAAP it is the ratio of incurred losses and
                                        loss adjustment expenses reduced by an allocation of fee income to net
                                        earned premiums.

Loss reserves........................   Liabilities established by insurers and reinsurers to reflect the
                                        estimated cost of claims incurred that the insurer or reinsurer will
                                        ultimately be required to pay in respect of insurance or reinsurance it
                                        has written.  Reserves are established for losses and for LAE, and
                                        consist of case reserves and IBNR reserves.

Losses and loss adjustment
       expenses......................   The sum of losses incurred and loss adjustment expenses.

Losses incurred......................   The total losses sustained by an insurance company under a policy or
                                        policies, whether paid or unpaid.  Incurred losses include a provision
                                        for IBNR.

National Association of
       Insurance Commissioners
       ("NAIC")......................   An organization of the insurance commissioners or directors of all 50
                                        states and the District of Columbia organized to promote consistency of
                                        regulatory practice and statutory accounting standards throughout the
                                        United States.

Net written premiums.................   Direct written premiums plus assumed reinsurance premiums less premiums
                                        ceded to reinsurers.

</TABLE>
                                       39
<PAGE>   42

<TABLE>
<CAPTION>
<S>                                     <C>

Non-admitted coverage................   Insurance coverage written in a given state by an insurer not licensed in
                                        that state.

Novation.............................   A transaction in which the original direct insurer's obligations are
                                        completely extinguished, resulting in no further exposure to loss arising
                                        on the business novated.

Personal lines.......................   Types of property and casualty insurance written for individuals or
                                        families, rather than for businesses.

Pool.................................   An organization of insurers or reinsurers through which particular types
                                        of risks are underwritten with premiums, losses and expenses being shared
                                        in agreed-upon percentages.

Premiums.............................   The amount charged during the year on policies and contracts issued,
                                        renewed or reinsured by an insurance company.

Producer.............................   Contractual entity which directs insureds to the insurer for coverage.
                                        See "Broker."

Property insurance...................   Insurance that provides coverage to a person with an insurable interest
                                        in tangible property for that person's property loss, damage or loss of
                                        use.

Quota share reinsurance..............   Reinsurance wherein the insurer cedes an agreed-upon fixed percentage of
                                        liabilities, premiums and losses for each policy covered on a pro rata
                                        basis.

Rate of renewal/retention
       ratio.........................   Current period renewal accounts or policies as a percentage of total
                                        accounts or policies available for renewal.

Rates................................   Amounts charged per unit of insurance.

Reinsurance..........................   The practice whereby one insurer, called the reinsurer, in consideration
                                        of a premium paid to such insurer, agrees to indemnify another insurer,
                                        called the ceding company, for part or all of the liability of the ceding
                                        company under one or more policies or contracts of insurance which it has
                                        issued.

Reinsurance agreement................   A contract specifying the terms of a reinsurance transaction.
</TABLE>

                                       40
<PAGE>   43

<TABLE>
<CAPTION>
<S>                                     <C>
Residual market (involuntary
       business).....................   Insurance market which provides coverage for risks unable to purchase
                                        insurance in the voluntary market either because the risk is too great or
                                        rate inadequacy has reduced the supply of insurance.  Residual markets
                                        are frequently created by state legislation either because of lack of
                                        available coverage such as property coverage in a windstorm prone area or
                                        protection of the accident victim as in the case of workers'
                                        compensation.  The costs of the residual market are usually charged back
                                        to the direct insurance carriers in proportion to the carriers' voluntary
                                        market shares for the type of coverage involved.

Retention............................   The amount of exposure an insurance company retains on any one risk or
                                        group of risks.

Retrospective premiums...............   Premiums related to retrospectively rated policies.

Retrospective rating.................   A plan or method which permits adjustment of the final premium or
                                        commission on the basis of actual loss experience, subject to certain
                                        minimum and maximum limits.

Risk-based capital ("RBC")...........   A measure adopted by the NAIC and enacted by states for assessing the
                                        minimum statutory capital and surplus requirements of insurers.

Risk retention.......................   The amount or portion of a risk an insurer retains for its own account
                                        after ceded reinsurance.  Losses above the stated retention level are
                                        collectible from the reinsurer.  The retention level may be stated as a
                                        percentage or dollar amount.

Salvage..............................   The amount of money an insurer recovers through the sale of property
                                        transferred to the insurer as a result of a loss payment.

Second injury fund...................   The employer of an injured, impaired worker is responsible only for the
                                        workers' compensation benefit for the most recent injury; the second
                                        injury fund would cover the cost of any additional benefits for
                                        aggravation of a prior condition.  The cost is shared by the insurance
                                        industry, funded through assessments to insurance companies based on
                                        either premiums or losses.

Self-insured retentions..............   That portion of the risk retained by a person for its own account.
</TABLE>


                                       41
<PAGE>   44

<TABLE>
<CAPTION>
<S>                                     <C>
Servicing carrier....................   An insurance company that provides, for a fee, various services including
                                        policy issuance, claims adjusting and customer service for insureds in a
                                        reinsurance pool.

Standard policy forms................   Self-contained pre-printed policy language used when a large number of
                                        insureds face similar loss exposures.

Statutory accounting practices
       ("SAP").......................   The rules and procedures prescribed or permitted by United States state
                                        insurance regulatory authorities for recording transactions and preparing
                                        financial statements.  Statutory accounting practices generally reflect a
                                        modified going concern basis of accounting.

Statutory surplus....................   As determined under SAP, the amount remaining after all liabilities,
                                        including loss reserves, are subtracted from all admitted assets.
                                        Admitted assets are assets of an insurer prescribed or permitted by a
                                        state to be recognized on the statutory balance sheet.  Statutory surplus
                                        is also referred to as "surplus" or "surplus as regards policyholders"
                                        for statutory accounting purposes.

Structured settlements...............   Periodic payments to an injured person or survivor for a determined
                                        number of years or for life, typically in settlement of a claim under a
                                        liability policy, usually funded through the purchase of an annuity.

Subrogation..........................   A principle of law incorporated in insurance policies, which enables an
                                        insurance company, after paying a loss to its insured, to recover the
                                        amount of the loss from another who is legally liable for it.

Third party liability................   A liability owed to a claimant (or "third party") who is not one of the
                                        two parties to the insurance contract.  Insured liability claims are
                                        referred to as third party claims.

Treaty reinsurance...................   The reinsurance of a specified type or category of risks defined in a
                                        reinsurance agreement (a "treaty") between a primary insurer or other
                                        reinsured and a reinsurer. Typically, in treaty reinsurance, the primary
                                        insurer or reinsured is obligated to offer and the reinsurer is obligated
                                        to accept a specified portion of all such type or category of risks
                                        originally written by the primary insurer or reinsured.

Umbrella coverage....................   A form of insurance protection against losses in excess of amounts
                                        covered by other liability insurance policies or amounts not covered by
                                        the usual liability policies.
</TABLE>

                                       42
<PAGE>   45

<TABLE>
<CAPTION>
<S>                                     <C>
Unassigned funds (surplus)...........   The undistributed and unappropriated amount of statutory surplus.

Underwriter..........................   An employee of an insurance company who examines, accepts or rejects
                                        risks and classifies accepted risks in order to charge an appropriate
                                        premium for each accepted risk.  The underwriter is expected to select
                                        business that will produce an average risk of loss no greater than that
                                        anticipated for the class of business.

Underwriting.........................   The insurer's or reinsurer's process of reviewing applications for
                                        insurance coverage, and the decision whether to accept all or part of the
                                        coverage and determination of the applicable premiums; also refers to the
                                        acceptance of such coverage.

Underwriting expense ratio...........   For SAP it is the ratio of underwriting expenses incurred to net written
                                        premiums.  For GAAP it is the ratio of underwriting expenses incurred
                                        reduced by an allocation of fee income to net written premiums.

Underwriting gain or
       underwriting loss.............   The pre-tax profit or loss experienced by a property and casualty
                                        insurance company after deducting loss and loss adjustment expenses and
                                        operating expenses from net earned premiums.  This profit or loss
                                        calculation includes reinsurance assumed and ceded but excludes
                                        investment income.

Unearned premium.....................   The portion of premiums written that is allocable to the unexpired
                                        portion of the policy term.

Voluntary market.....................   The market in which a person seeking insurance obtains coverage without
                                        the assistance of residual market mechanisms.

Wholesale broker.....................   An independent or exclusive agent that represents both admitted and non
                                        admitted insurers in market areas which include standard, non-standard,
                                        specialty and excess and surplus lines of insurance.  The wholesaler does
                                        not deal directly with the insurance consumer.  The wholesaler deals with
                                        the retail agent or broker.

Workers' compensation................   A system (established under state and federal laws) under which employers
                                        provide insurance for benefit payments to their employees for
                                        work-related injuries, deaths and diseases, regardless of fault.
</TABLE>


                                       43
<PAGE>   46

ITEM 2.       PROPERTIES.

         The Company's executive offices are located in Hartford, Connecticut.
The Company rents from an affiliate of Citigroup approximately 1,030,000 square
feet of office space in Hartford, Connecticut, under a ten-year lease that
expires on April 1, 2006 and, subject to certain conditions, is renewable by the
Company for additional five-year terms. Under certain circumstances, the Company
may be required to purchase the leased premises. In addition, the Company leases
180 field offices totaling approximately 4,827,000 square feet throughout the
United States under leases or subleases with third parties. The Company also
rents from Aetna approximately 373,000 square feet of office space at CityPlace,
located in Hartford, Connecticut, under an eight-year sublease that expires in
2004.

         The Company believes its properties are adequate and suitable for its
business as presently conducted and are adequately maintained. For further
information concerning leases, see Note 12 of Notes to Consolidated Financial
Statements.

ITEM 3.       LEGAL PROCEEDINGS.

         This section describes the major pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which the Company or
its subsidiaries is a party or to which any of their property is subject.

         Beginning in January 1997, sixteen purported class actions and one
multi-party action were commenced in various courts against certain subsidiaries
of the Company, dozens of other insurers and the National Council on
Compensation Insurance ("NCCI"). The allegations in the actions are
substantially similar. The plaintiffs generally allege that the defendants
conspired to collect excessive or improper premiums on certain loss-sensitive
workers' compensation insurance policies in violation of state insurance laws,
antitrust laws, and state unfair trade practices laws. Plaintiffs seek
unspecified monetary damages. Actions have been commenced in the following
jurisdictions: Georgia (El Chico Restaurants, Inc. v. The Aetna Casualty and
Surety Company, et al. and FFE Transportation Services, Inc. et al. v. NCCI, et
al.); Tennessee (El Chico Restaurants, Inc. v. The Aetna Casualty and Surety
Company, et al.); Florida (Bristol Hotel Management Corp., et al. v. The Aetna
Casualty and Surety Company, et al.); New Jersey (Foodarama Supermarkets, Inc.,
et al. v. The Aetna Casualty and Surety Company, et al.); Illinois (Hill-Behan
Lumber Co v. Hartford Insurance Co. et al. and CR/PL Management Co., et al. v.
Allianz Insurance Company Group, et al.); Pennsylvania (Foodarama Supermarkets,
Inc. v. The Aetna Casualty and Surety Company, et al.); Missouri (Hill-Behan
Lumber Corp., et al. v. Hartford Insurance Co., et al.); California (Dal-Tile
Corp., et al. v. NCCI, et al.); Texas (Sandwich Chef of Texas, Inc., et al. v.
Reliance National Insurance Company, et al.); Alabama (Alumax Inc., et al. v.
Allianz Insurance Company, et al.); Michigan (American Association of Retired
Persons, et al. v. National Surety Corp., et al.); Kentucky (Payless Cashways,
Inc. et al. v. National Surety Corp. et al.); New York (Burnham Service Corp. v.
NCCI, et al.); and Arizona (Albany International Corp. v. American National Fire
Insurance Company, et al.). The Company has vigorously defended all of these
cases, and intends to continue doing so.



                                       44
<PAGE>   47
         The trial courts have ordered partial dismissals of ten of these cases:
those pending in Tennessee, Florida, New Jersey, Illinois (both cases),
Pennsylvania, Missouri, Alabama, New York and Arizona. The trial courts in Texas
and Michigan have denied defendants' motions to dismiss. Interlocutory appeals
are pending from the trial courts' rulings in New York and Michigan. In January
2000, the Pennsylvania court denied class certification and the California court
granted all defendants' demurrers and subsequently dismissed the complaint with
prejudice.

         In the ordinary course of business, certain of the Company's
subsidiaries receive claims asserting alleged injuries and damages from asbestos
and other hazardous waste and toxic substances. The conditions surrounding the
final resolution of these claims continue to change. Currently, it is not
possible to predict legal and legislative changes and their impact on the future
development of asbestos and environmental claims. Such development will be
affected by future court decisions and interpretations as well as changes in
legislation applicable to such claims. Because of these future unknowns,
additional liabilities may arise exceeding current reserves. The magnitude of
these additional amounts, or a range of these additional amounts, cannot now be
reasonably estimated, and could result in a liability exceeding reserves by an
amount that would be material to the Company's operating results in a future
period. However, the Company believes that it is not likely that these claims
will have a material adverse effect on the Company's financial condition or
liquidity.

         The Company is involved in numerous other lawsuits (other than
environmental and asbestos claims) arising mostly in the ordinary course of
business operations either as a liability insurer defending third-party claims
brought against insureds or an insurer defending coverage claims brought against
it. 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.

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

              Not Applicable.

                                     PART II

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

         The Company's Class A Common Stock is listed on the NYSE under the
symbol "TAP." There is no established public trading market for the Company's
Class B Common Stock. The high and low sale prices, as reported on the
consolidated transaction reporting system, for the Class A Common Stock for the
periods indicated, and the dividends per share, are set forth on the following
page:


                                       45

<PAGE>   48

<TABLE>
<CAPTION>
                                                1998                                          1999                            2000
                           -------------------------------------------- ----------------------------------------------    ---------
                             1ST Q        2ND Q     3RD Q      4TH Q         1ST Q      2ND Q      3RD Q      4TH Q          1ST Q*
                           ---------- ----------- ---------- ----------    ---------- ---------- ---------- ----------    ---------
Class A Common
Stock Price

<S>                          <C>         <C>        <C>        <C>           <C>        <C>        <C>        <C>          <C>
High                         $46.063     $45.625    $45.750    $35.500       $38.500    $41.375    $41.875    $38.875      $38.500
Low                          $39.125     $38.750    $29.625    $24.125       $28.188    $33.375    $28.750    $27.688      $29.875

Dividends per
Share of Class A Common
Stock                           $.10        $.10       $.10       $.10         $.125      $.125      $.125      $.125         $.14
</TABLE>

* Through March 3, 2000

         At March 3, 2000, the Company had approximately 1,576 holders of record
of its Class A Common Stock. This figure does not represent the actual number of
beneficial owners of common stock because shares are frequently held in "street
name" by securities dealers and others for the benefit of individual owners who
may vote the shares. At March 3, 2000, TIGI was the sole holder of record of the
Company's Class B Common Stock.

         For information on dividend restrictions in certain long-term loan and
credit agreements of the Company and its subsidiaries, as well as restrictions
on the ability of certain of the Company's subsidiaries to transfer funds to the
Company in the form of cash dividends or otherwise, see Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

ITEM 6.       SELECTED FINANCIAL DATA.

         See "Five-Year Summary of Selected Financial Data" on page 17 of the
Company's 1999 Annual Report to Stockholders (the "1999 Annual Report"),
included as part of Exhibit 13 to this Form 10-K and incorporated herein by
reference.

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

         See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" beginning on page 18 of the 1999 Annual Report, included
as part of Exhibit 13 to this Form 10-K and incorporated herein by reference.

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
              MARKET RISK.

         See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" beginning on page 18 of the 1999 Annual Report, included
as part of Exhibit 13 to this Form 10-K and incorporated herein by reference.

                                       46
<PAGE>   49
ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         See Index to Consolidated Financial Statements and Schedules on page
F-1 hereof. There is also incorporated by reference herein in response to this
Item the material under the caption "Selected Quarterly Financial Data
(unaudited)" on page 54 of the 1999 Annual Report, which material is included as
part of Exhibit 13 to this Form 10-K.

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.

         For information on the directors of the Company, see the material under
the caption "Election of directors," in the definitive Proxy Statement for the
Company's Annual Meeting of Stockholders to be held on April 18, 2000, filed
with the Securities and Exchange Commission (the "Proxy Statement"),
incorporated herein by reference. For information on executive officers, see
Item 1, "Business -- Other Information -- Executive Officers of the Company"
herein.

ITEM 11.      EXECUTIVE COMPENSATION.

         See the material under the caption "Executive compensation" and "How we
have done" of the Proxy Statement, incorporated herein by reference.

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

         See the material under the captions "About the annual meeting" and
"Stock ownership" of the Proxy Statement, incorporated herein by reference.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         See the material under the captions "Election of directors" and
"Executive compensation" of the Proxy Statement, incorporated herein by
reference.


                                       47
<PAGE>   50
                                     PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
              REPORTS ON FORM 8-K.

     (a)      Documents filed as a part of the report:

         (1)     Financial Statements. See Index to Consolidated Financial
                 Statements and Schedules on page F-1 hereof.

         (2)    Financial Statement Schedules. See Index to Consolidated
                Financial Statements and Schedules on page F-1 hereof.

         (3)     Exhibits:

                 See Exhibit Index.

     (b)      Reports on Form 8-K:

              There were no reports on Form 8-K filed during the quarter ended
              December 31, 1999; however, on February 29, 2000, the Company
              filed a Current Report on Form 8-K, dated February 29, 2000,
              reporting under Item 5 thereof certain information related to
              Travelers Property Casualty Corp. issuing a press release
              announcing that it had signed a letter of intent to acquire the
              surety business of Reliance Group Holdings, Inc.


                                       48
<PAGE>   51

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>


EXHIBIT
NUMBER                      DESCRIPTION OF EXHIBIT
------                      ----------------------

<S>                         <C>
3.01                        Restated Certificate of Incorporation of Travelers
                            Property Casualty Corp. (the "Company"), Certificate
                            of Designations, Powers, Preferences and Rights of
                            7.5% Redeemable Preferred Stock, Series Z, of the
                            Company, Certificate of Amendment to the Restated
                            Certificate of Incorporation, filed March 7, 1997,
                            and Certificate of Amendment to the Restated
                            Certificate of Incorporation, filed April 23, 1997,
                            incorporated by reference to Exhibit 3.01 to the
                            Company's Quarterly Report on Form 10-Q for the
                            fiscal quarter ended March 31, 1997 (File
                            No.1-14328) (the "Company's 3/31/97 10-Q").

3.02+                       By-Laws of the Company, effective January 19, 1999.

4.01                        Intercompany Agreement, dated as of April 2, 1996,
                            between Travelers Group Inc. and the Company,
                            incorporated by reference to Exhibit 4.1 to the
                            Company's Form S-1.

4.02.1                      Shareholders Agreement, dated as of April 2, 1996,
                            by and among the Company, The Travelers Insurance
                            Group Inc., Aetna Life and Casualty Company (now
                            known as Aetna Services, Inc.), J.P. Morgan Capital
                            Corporation, The Trident Partnership, L.P. and Fund
                            American Enterprises Holdings, Inc., incorporated by
                            reference to Exhibit 4.2 to the Company's Form S-1.

4.02.2                      Amendment to Shareholders Agreement, dated June 20,
                            1997, by and among the Company, Aetna Services,
                            Inc., J.P. Morgan Capital Corporation, The Trident
                            Partnership, L.P. and Fund American Enterprises
                            Holdings, Inc., incorporated by reference to Exhibit
                            4.02.2 to the Company's Annual Report on Form 10-K
                            for the fiscal year ended December 31, 1997 (File
                            No. 1-14328) (the "Company's 1997 10-K").
</TABLE>

                                       49
<PAGE>   52

<TABLE>
<CAPTION>


EXHIBIT
NUMBER                      DESCRIPTION OF EXHIBIT
------                      ----------------------

<S>                         <C>
10.01.01*                   Travelers Property Casualty Corp. Capital
                            Accumulation Plan (as amended through July 23,
                            1997), incorporated by reference to Exhibit 10.01 to
                            the Company's Quarterly Report on Form 10-Q for the
                            fiscal quarter ended September 30, 1997 (File No.
                            1-14328).

10.01.02*+                  Amendment to the Travelers Property Casualty Corp.
                            Capital Accumulation Plan (as amended through July
                            23, 1997).

10.02*                      Travelers Property Casualty Corp. 1996 Executive
                            Option Plan (as amended through March 7, 1997),
                            incorporated by reference to Exhibit 10.03 to the
                            Company's Annual Report on Form 10-K for the fiscal
                            year ended December 31, 1996 (File No. 1-14328) (the
                            "Company's 1996 10-K").

10.03*                      Travelers Property Casualty Corp. Executive
                            Performance Compensation Plan (as amended through
                            March 7, 1997), incorporated by reference to Exhibit
                            10.04 to the Company's 1996 10-K.

10.04*+                     Travelers Property Casualty Corp. 1996 Deferred
                            Compensation Plan for Non-Employee Directors (as
                            amended through April 1, 1999).

10.05.1*                    Travelers Group Capital Accumulation Plan (as
                            amended through July 23, 1997), incorporated by
                            reference to Exhibit 10.02 to the Quarterly Report
                            on Form 10-Q of Travelers Group Inc. for the fiscal
                            quarter ended September 30, 1997 (File No. 1-9924)
                            (the "TRV 9/30/97 10-Q").

10.05.2*                    Amendment to Travelers Group Capital Accumulation
                            Plan (as amended through July 23, 1997),
                            incorporated by reference to Exhibit 10.08.2 to the
                            Annual Report on Form 10-K of Citigroup Inc. for the
                            fiscal year ended December 31, 1999 (File No.
                            1-9924) (the "Citigroup 12/31/99 10-K").

10.06.1*                    Travelers Group Stock Option Plan (as amended and
                            restated as of April 24, 1996), incorporated by
                            reference to Exhibit 10.02.1 to the Annual Report on
                            Form 10-K of Travelers Group Inc. for the fiscal
                            year ended December 31, 1996 (File No. 1-9924) (the
                            "TRV 1996 10-K").

10.06.2*                    Amendment No. 14 to the Travelers Group Stock Option
                            Plan, incorporated by reference to Exhibit 10.01 to
                            the Quarterly Report on Form 10-Q of Travelers Group
                            Inc. for the fiscal quarter ended September 30, 1996
                            (File No. 1-9924).

10.06.3*                    Amendment No. 15 to the Travelers Group Stock Option
                            Plan, incorporated by reference to Exhibit 10.04 to
                            the TRV 9/30/97 10-Q.
</TABLE>

                                       50
<PAGE>   53
<TABLE>
<CAPTION>


EXHIBIT
NUMBER                      DESCRIPTION OF EXHIBIT
------                      ----------------------

<S>                         <C>
10.06.4*                    Amendment No. 16 to the Travelers Group Stock Option
                            Plan, incorporated by reference to Exhibit 10.02.4
                            to the Citigroup 12/31/99 10-K.

10.07.1*                    Travelers Group 1996 Stock Incentive Plan (as
                            amended through July 23, 1997), incorporated by
                            reference to Exhibit 10.03 to the TRV 9/30/97 10-Q.

10.07.2*                    Amendment to the Travelers Group 1996 Stock
                            Incentive Plan (as amended through July 23, 1997),
                            incorporated by reference to Exhibit 10.03.2 to the
                            Citigroup 12/31/99 10-K.

10.08*                      Travelers Group Inc. Retirement Benefit Equalization
                            Plan (as amended and restated as of January 2,
                            1996), incorporated by reference to Exhibit 10.04 to
                            Citigroup Inc.'s Annual Report on Form 10-K for the
                            fiscal year ended December 31, 1998 (File No.
                            1-9934) (the "Citigroup 1998 10-K").

10.09                       TAPC Tax Allocation Agreement, effective as of
                            January 1, 1996 between Travelers Group Inc. and the
                            Company, incorporated by reference to Exhibit 10.9
                            to the Company's Form S-1.

10.10                       Lease for office space at CityPlace, dated March 28,
                            1996, by and between Aetna Life and Casualty Company
                            and The Travelers Indemnity Company, incorporated by
                            reference to Exhibit 10.10 to the Company's Form
                            S-1.

10.11                       Lease for office space in Hartford, Connecticut,
                            dated as of April 2, 1996, by and between The
                            Travelers Insurance Company and The Travelers
                            Indemnity Company, incorporated by reference to
                            Exhibit 10.14 to the Company's 1996 10-K.

10.12*                      Letter Agreement, dated November 17, 1996, between
                            the Company and Stanton F. Long, incorporated by
                            reference to Exhibit 10.15 to the Company's 1996
                            10-K.


10.13*                      The Travelers Insurance Deferred Compensation Plan
                            (formerly The Travelers Corporation TESIP
                            Restoration and Non-Qualified Savings Plan) (as
                            amended December 10, 1998), incorporated by
                            reference to Exhibit 10.10 to the Citigroup 1998
                            10-K.

12.01+                      Computation of Ratio of Earnings to Fixed Charges.

13.01+                      Pages 17 through 55 of the 1999 Annual Report to
                            Stockholders of the Company (pagination of exhibit
                            does not correspond to pagination in the 1999 Annual
                            Report to Stockholders).

21.01+                      Subsidiaries of the Registrant.
</TABLE>


                                       51
<PAGE>   54
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                      DESCRIPTION OF EXHIBIT
-------                     ----------------------
<S>                         <C>

23.01+                      Consent of KPMG LLP, Independent Certified Public Accountants.

24.01+                      Powers of Attorney.

27.01+                      Financial Data Schedule.

</TABLE>


The total amount of securities authorized pursuant to any instrument defining
rights of holders of long-term debt of the Company does not exceed 10% of the
total assets of the Company and its consolidated subsidiaries. The Company will
furnish copies of any such instrument to the Commission upon request.

The financial statements required by Form 11-K for 1999 for the Travelers Group
401(k) Savings Plan will be filed as an exhibit by amendment to this Form 10-K
pursuant to Rule 15d-21 of the Securities Exchange Act of 1934, as amended.

Copies of any of the exhibits referred to above will be furnished at a cost of
$.25 per page (although no charge will be made for the 1999 Annual Report on
Form 10-K) to security holders who make written request therefor to Corporate
Communications, Travelers Property Casualty Corp., One Tower Square, Hartford,
Connecticut 06183.

------------------
*      Denotes a management contract or compensatory plan or arrangement
       required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.

+      Filed herewith.



                                       52
<PAGE>   55
                                   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 10th day of
March, 2000.

                                        TRAVELERS PROPERTY CASUALTY CORP.
                                        (Registrant)

                                        By:/s/ Jay S. Fishman
                                        ---------------------
                                        Jay S. Fishman,
                                        President and Chief Executive 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 10th day of March, 2000.
<TABLE>
<CAPTION>

                     SIGNATURE                                                      TITLE
                     ---------                                                      -----

<S>                                                            <C>
                /s/ Jay S. Fishman                             President and Chief Executive Officer
                ------------------                             (Principal Executive Officer) and Director
                    Jay S. Fishman



               /s/ William P. Hannon                                     Chief Financial Officer
               ---------------------                                   (Principal Financial Officer)
                 William P. Hannon


              /s/ Douglas K. Russell                           Vice President and Chief Accounting Officer
              ----------------------                           (Principal Accounting Officer)
                Douglas K. Russell

                         *                                                  Director
              ----------------------
                Kenneth J. Bialkin

                         *                                                  Director
              ----------------------
                Leslie B. Disharoon

                         *                                            Chairman and Director
              ----------------------
                  Robert I. Lipp

                         *                                                  Director
              ----------------------
                  Dudley C. Mecum
</TABLE>

                            53
<PAGE>   56

<TABLE>
<CAPTION>
                     SIGNATURE                                               TITLE
                     ---------                                               -----
<S>                                                                         <C>
                         *                                                  Director
              ----------------------
                  Frank J. Tasco

                         *                                                  Director
              ----------------------
                 Sanford I. Weill

                         *                                                  Director
              ----------------------
                  Arthur Zankel


</TABLE>

*By:    /s/ Jay S. Fishman
       ----------------------
           Jay S. Fishman
           Attorney-in-fact



                                       54
<PAGE>   57

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES *

<TABLE>
<CAPTION>


                                                                                           Incorporated
                                                                                         by Reference from
                                                                                        the Company's 1999
                                                                                         Annual Report to
                                                                          Page            Stockholders at
                                                                         Herein           Page Indicated

<S>                                                                   <C>            <C>
Independent Auditors' Report                                               F-2                  55

Consolidated Statement of Income for the years ended
   December 31, 1999, 1998 and 1997                                                             34

Consolidated Balance Sheet at December 31, 1999 and 1998                                        35

Consolidated Statement of Changes in Stockholders' Equity
   for the years ended December 31, 1999, 1998 and 1997                                         36

Consolidated Statement of Cash Flows for the years ended
   December 31, 1999, 1998 and 1997                                                             37

Notes to Consolidated Financial Statements                                                     38-54

Schedules:

Schedule II - Condensed Financial Information of
   Registrant (Parent Company only)                                   F-3 - F-6

Schedule III - Supplementary Insurance Information                    F-7 - F-9

Schedule VI - Supplementary Information Concerning
   Property-Casualty Insurance Operations                               F-10


</TABLE>
* Schedules not listed are omitted as not applicable or not required by
Regulation S-X.

                                       F-1

<PAGE>   58
                          Independent Auditors' Report
                          ----------------------------


The Board of Directors and Stockholders
Travelers Property Casualty Corp.:

Under date of January 18, 2000, we reported on the consolidated balance sheets
of Travelers Property Casualty Corp. and Subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1999, which are incorporated by reference in the
December 31, 1999 annual report on Form 10-K. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related financial statement schedules 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, in 1999 the
Company changed its methods of accounting for insurance and reinsurance
contracts that do not transfer insurance risk and its accounting for
insurance-related assessments.

/s/ KPMG LLP
Hartford, Connecticut
January 18, 2000

                                       F-2

<PAGE>   59




                                                                     SCHEDULE II


                        Travelers Property Casualty Corp.
                              (Parent Company Only)

                  Condensed Financial Information of Registrant
                                  (In millions)

                          CONDENSED STATEMENT OF INCOME


<TABLE>
<CAPTION>

                                                                      For the year
                                                                    ended December 31,
                                                                    ------------------
                                                           1999           1998           1997
                                                           ----           ----           ----
<S>                                                     <C>            <C>            <C>

REVENUES
Net investment income and other                         $     8        $    14        $     9

EXPENSES
Interest                                                    154            163            165
Other                                                        11              4              7
                                                        -------        -------        -------
                                                            165            167            172
                                                        -------        -------        -------

Loss before federal income tax benefit and equity
  in net income of subsidiaries                            (157)          (153)          (163)
Federal income tax benefit                                   54             54             59
                                                        -------        -------        -------
Loss before equity in net income of subsidiaries           (103)           (99)          (104)
Equity in net income of subsidiaries                      1,379          1,442          1,340
                                                        -------        -------        -------

Net income                                              $ 1,276        $ 1,343        $ 1,236
                                                        =======        =======        =======
</TABLE>

The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto and the accompanying notes
to the condensed financial information of Registrant.


                                       F-3
<PAGE>   60



                                                                     SCHEDULE II
                        Travelers Property Casualty Corp.
                              (Parent Company Only)

                  Condensed Financial Information of Registrant
                                  (In millions)

                             CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>

                                                                       December 31,
                                                                    1999           1998
                                                                    ----           ----
ASSETS
<S>                                                            <C>             <C>
Short-term securities                                            $     19      $    154
Investment in subsidiaries at equity                               10,776        11,234
Deferred federal income taxes                                          16            14
Other assets                                                            4            11
                                                                 --------      --------
                  Total assets                                   $ 10,815      $ 11,413
                                                                 ========      ========

LIABILITIES
Long-term debt                                                   $  1,777      $  2,177
Other liabilities                                                      97           111
                                                                 --------      --------
                  Total liabilities                                 1,874         2,288
                                                                 --------      --------

STOCKHOLDERS' EQUITY
Common Stock:
     Class A, $.01 par value, 700 million shares authorized;
       72,393,407 shares issued and outstanding                         1             1
     Class B, $.01 par value, 700 million shares authorized;
       328,020,170 shares issued and outstanding                        3             3
Additional paid-in capital                                          5,479         5,479
Retained earnings                                                   4,133         3,052
Accumulated other changes in equity from nonowner sources            (202)          921
Treasury stock, at cost (shares, 13,159,386 and 8,544,687)           (451)         (298)
Unearned compensation                                                 (22)          (33)
                                                                 --------      --------
                  Total stockholders' equity                        8,941         9,125
                                                                 --------      --------
                  Total liabilities and stockholders' equity     $ 10,815      $ 11,413
                                                                 ========      ========
</TABLE>

The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto and the accompanying notes
to the condensed financial information of Registrant.


                                       F-4


<PAGE>   61
                                                                     SCHEDULE II
                        Travelers Property Casualty Corp.
                              (Parent Company Only)

                  Condensed Financial Information of Registrant
                                  (In millions)

                        CONDENSED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                      For the year
                                                                    ended December 31,
                                                                    ------------------
                                                               1999       1998          1997
                                                               ----       ----          ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                          <C>         <C>         <C>
   Net income                                                $ 1,276      $ 1,343      $ 1,236
     Adjustments to reconcile net income to net
       cash provided by operating activities:
       Equity in net income of subsidiaries                   (1,379)      (1,442)      (1,340)
       Dividends received from consolidated subsidiaries         850          540          340
       Amortization expense                                        2            2            2
       Deferred federal income tax benefit                        (2)           1           (2)
       Federal income taxes receivable                             1            2           32
       Other assets                                                6           (6)        --
       Other liabilities                                          (5)          (3)           6
                                                             -------      -------      -------
         Net cash provided by operating activities               749          437          274
                                                             -------      -------      -------

CASH FLOWS FROM INVESTING ACTIVITIES
   Short-term securities, purchases, net                         135         (143)          (5)
   Other investments, net                                       (135)        --           --
                                                             -------      -------      -------
         Net cash used in investing activities                  --           (143)          (5)
                                                             -------      -------      -------

CASH FLOWS FROM FINANCING ACTIVITIES
   Issuance (repayment) of commercial paper, net                --           (108)          83
   Payment of long-term debt                                    (400)        --           --
   Purchase of treasury stock                                   (169)         (62)        (268)
   Restricted stock issuance                                      15           33           34
   Dividends to TIGI                                            (164)        (131)         (98)
   Dividends to minority shareholders                            (31)         (26)         (21)
                                                             -------      -------      -------
         Net cash used in financing activities                  (749)        (294)        (270)
                                                             -------      -------      -------
   Net decrease in cash                                         --           --             (1)

   Cash at beginning of period                                  --           --              1
                                                             -------      -------      -------
   Cash at end of period                                     $  --        $  --        $  --
                                                             =======      =======      =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Cash paid during the period for interest                  $   162      $   163      $   163
                                                             =======      =======      =======
   Cash received during the period for taxes                 $    53      $    57      $    79
                                                             =======      =======      =======
</TABLE>

The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto and the accompanying notes
to the condensed financial information of Registrant.


                                       F-5

<PAGE>   62
                                                                     SCHEDULE II

NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT


1.  GENERAL

    Travelers Property Casualty Corp. (TAP) (a direct majority-owned subsidiary
    of The Travelers Insurance Group Inc. (TIGI) and an indirect majority-owned
    subsidiary of Citigroup Inc. (formerly Travelers Group Inc.)) was organized
    on January 16, 1996. In April 1996, TIGI contributed The Travelers Indemnity
    Company and its subsidiaries to TAP. In addition, TAP purchased all of the
    outstanding capital stock of Travelers Casualty and Surety Company (formerly
    The Aetna Casualty and Surety Company) and The Standard Fire Insurance
    Company for a purchase price of approximately $4.2 billion in cash.

2.  PRINCIPLES OF CONSOLIDATION

    The accompanying financial statements include the accounts of TAP and, on an
    equity basis, its subsidiaries and affiliates and should be read in
    conjunction with the Consolidated Financial Statements and notes thereto.

3.  DEBT

    On each of September 1, 1999 and October 1, 1999, TAP repaid $200 million
    for its 6-3/4% notes and 6-1/4% notes, respectively, which matured on those
    dates.

    The annual maturities of the outstanding debt are as follows: $500 million
    in 2001 and $1,277 million after 2004.


                                       F-6
<PAGE>   63
                                  SCHEDULE III

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES


                       Supplementary Insurance Information

                                      1999
                                  (In millions)

<TABLE>
<CAPTION>

Segment              Deferred policy        Claims and        Unearned        Premium            Net
                     acquisition costs      claim adjust-     premiums        revenue          investment
                                            ment expense                                         income
                                            reserves                                              (a)
<S>                  <C>                    <C>               <C>              <C>              <C>
Commercial
   Lines .........          $   277          $26,184          $ 2,608          $ 4,375          $ 1,689

Personal
   Lines .........              248            2,670            1,666            3,634              400
                            -------          -------          -------          -------          -------

Total - Reportable
   Segments ......              525           28,854            4,274            8,009            2,089

Other ............               --              149               --               --                3
                            -------          -------          -------          -------          -------

Consolidated .....          $   525          $29,003          $ 4,274          $ 8,009          $ 2,092
                            =======          =======          =======          =======          =======
</TABLE>

<TABLE>
<CAPTION>

                                                   Amortization
Segment                         Claims             of deferred             Other               Premiums
                              and claim              policy               operating            written
                              adjustment          acquisition             expenses
                               expenses               costs                  (b)
<S>                           <C>                 <C>                     <C>                  <C>
Commercial
   Lines .........               $3,505               $  617               $  805               $4,408

Personal
   Lines .........                2,554                  643                  364                3,805
                                 ------               ------               ------               ------

Total - Reportable
   Segments ......                6,059                1,260                1,169                8,213

Other ............                   --                   --                  169                   --
                                 ------               ------               ------               ------

Consolidated .....               $6,059               $1,260               $1,338               $8,213
                                 ======               ======               ======               ======
</TABLE>




(a)  Net investment income for each segment is accounted for separately, except
     for the portion earned on the investment of stockholders' equity, which is
     allocated based on assigned capital.

(b)  Expense allocations are determined in accordance with prescribed statutory
     accounting practices. These practices make a reasonable allocation of all
     expenses to those product lines with which they are associated.



                                      F-7
<PAGE>   64


                                  SCHEDULE III

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

                       Supplementary Insurance Information

                                      1998
                                  (In millions)
<TABLE>
<CAPTION>



Segment                  Deferred policy      Claims and        Unearned           Premium
                         acquisition costs    claim adjust-     premiums           revenue
                                              ment expense
                                              reserves
<S>                          <C>               <C>               <C>               <C>
Commercial
   Lines                     $   292           $26,702           $ 2,597           $ 4,525

Personal
   Lines                         226             2,709             1,569             3,271
                             -------           -------           -------           -------

Total - Reportable
   Segments                      518            29,411             4,166             7,796

Other                           --                 178              --                --
                             -------           -------           -------           -------

Consolidated                 $   518           $29,589           $ 4,166           $ 7,796
                             =======           =======           =======           =======
</TABLE>

<TABLE>
<CAPTION>
                                                            Amortization
                         Net               Claims           of deferred        Other           Premiums
                         investment       and claim         policy             operating       written
Segment                  income           adjustment        acquisition        expenses
                         (a)              expenses          costs              (b)
<S>                     <C>               <C>               <C>               <C>               <C>
Commercial
   Lines                $ 1,709           $ 3,766           $   645           $   916           $ 4,614

Personal
   Lines                    389             2,181               552               372             3,490
                        -------           -------           -------           -------           -------

Total - Reportable
   Segments               2,098             5,947             1,197             1,288             8,104

Other                         2              --                --                 182              --
                        -------           -------           -------           -------           -------

Consolidated            $ 2,100           $ 5,947           $ 1,197           $ 1,470           $ 8,104
                        =======           =======           =======           =======           =======
</TABLE>

(a)  Net investment income for each segment is accounted for separately, except
     for the portion earned on the investment of stockholders' equity, which is
     allocated based on assigned capital.

(b) Expense allocations are determined in accordance with prescribed statutory
    accounting practices. These practices make a reasonable allocation of all
    expenses to those product lines with which they are associated.


                                       F-8

<PAGE>   65
                                  SCHEDULE III

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

                       Supplementary Insurance Information

                                      1997
                                  (In millions)
<TABLE>
<CAPTION>



Segment                  Deferred policy      Claims and        Unearned           Premium
                         acquisition costs    claim adjust-     premiums           revenue
                                              ment expense
                                              reserves
<S>                      <C>                  <C>               <C>               <C>
Commercial
   Lines                     $   309           $27,356           $ 2,519           $ 4,308

Personal
   Lines                         192             2,782             1,348             2,917
                             -------           -------           -------           -------

Total - Reportable
   Segments                      501            30,138             3,867             7,225

Other                           --                 186              --                --
                             -------           -------           -------           -------

Consolidated                 $   501           $30,324           $ 3,867           $ 7,225
                             =======           =======           =======           =======
</TABLE>


<TABLE>
<CAPTION>
                                                                    Amortization
                                 Net               Claims           of deferred        Other              Premiums
Segment                          investment       and claim         policy             operating          written
                                 income           adjustment        acquisition        expenses
                                 (a)              expenses          costs              (b)

<S>                              <C>              <C>               <C>                <C>                <C>
Commercial
   Lines                           $ 1,695           $ 3,631           $   622           $   980           $ 4,758

Personal
   Lines                               353             1,853               505               366             3,074
                                   -------           -------           -------           -------           -------

Total - Reportable
   Segments                          2,048             5,484             1,127             1,346             7,832

Other                                    3              --                --                 202              --
                                   -------           -------           -------           -------           -------

Consolidated                       $ 2,051           $ 5,484           $ 1,127           $ 1,548           $ 7,832
                                   =======           =======           =======           =======           =======
</TABLE>

(a)  Net investment income for each segment is accounted for separately, except
     for the portion earned on the investment of stockholders' equity, which is
     allocated based on assigned capital.


(b) Expense allocations are determined in accordance with prescribed statutory
    accounting practices. These practices make a reasonable allocation of all
    expenses to those product lines with which they are associated.


                                       F-9


<PAGE>   66


                                   SCHEDULE VI

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES


  Supplementary Information Concerning Property-Casualty Insurance Operations(1)

                                    1997-1999

                                  (In millions)


<TABLE>
<CAPTION>
                                                   Reserves for
                                                     unpaid          Discount
                                   Deferred          claims            from
        Affiliation                 policy          and claim        reserves                                             Net
           with                  acquisition       adjustment        for unpaid      Unearned            Earned       investment
         registrant                  costs           expenses         claims (2)      premiums          premiums        income
          -------                  -------           -------          -------         -------           -------         -------
<S>                               <C>               <C>              <C>              <C>               <C>            <C>
1999 Consolidated property -
     casualty operations            $   525           $28,854           $   832         $ 4,274           $ 8,009       $ 2,089


1998 Consolidated property -
     casualty operations            $   518           $29,411           $   781         $ 4,166           $ 7,796       $ 2,098


1997 Consolidated property -
     casualty operations            $   501           $30,138           $   912         $ 3,867           $ 7,225       $ 2,048
</TABLE>


<TABLE>
<CAPTION>
                                                Claims and
                                               claim adjust-
                                                ment expenses            Amortization
                                             incurred related to:         of deferred     Paid claims
       Affiliation                         ------------------------          policy        and claim
          with                             Current          Prior         acquisition      adjustment       Premiums
       registrant                            Year            Year              costs         expenses        written
        -------                            -------         --------       -----------     -------------     ----------
<S>                                        <C>              <C>            <C>             <C>               <C>
1999 Consolidated property -
     casualty operations                   $6,194           $ (242)           $1,260           $6,732           $8,213


1998 Consolidated property -
     casualty operations                   $6,057           $ (323)           $1,197           $6,377           $8,104


1997 Consolidated property -
     casualty operations                   $5,730           $ (492)           $1,127           $5,648           $7,832

</TABLE>


(1)    Excludes accident and health business.
(2)    See "Discounting" on page 18.



                                      F-10