<PAGE>

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

                                    FORM 10-Q

|X|         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

                                       OR

| |         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE TRANSITION PERIOD FROM _______ TO _______

                                   ----------

                        COMMISSION FILE NUMBER 001-31266

                                   ----------

                        TRAVELERS PROPERTY CASUALTY CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

         CONNECTICUT                                            06-1008174
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

                  ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
               (Address of principal executive offices) (Zip Code)

                                 (860) 277-0111
              (Registrant's telephone number, including area code)

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 THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:

                 COMMON STOCK OUTSTANDING AS OF JULY 31, 2002:

                 CLASS A                           500,000,000
                 CLASS B                           500,000,000
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

                                TABLE OF CONTENTS

                         Part I - Financial Information

<TABLE>
<CAPTION>
Item 1. Financial Statements:                                           Page No.
                                                                        --------
<S>                                                                     <C>
        Condensed Consolidated Statement of Income (Unaudited) -
           Three Months Ended June 30, 2002 and 2001                        3

        Condensed Consolidated Balance Sheet - June 30, 2002
           (Unaudited) and December 31, 2001                                4

        Condensed Consolidated Statement of Changes in Shareholders'
           Equity (Unaudited) - Six Months Ended June 30, 2002              5

        Condensed Consolidated Statement of Cash Flows (Unaudited) -
           Six Months Ended June 30, 2002 and 2001                          6

        Notes to Condensed Consolidated Financial Statements
           (Unaudited)                                                      7

Item 2. Management's Discussion and Analysis of Financial
           Condition and Results of Operations                             19

Item 3. Quantitative and Qualitative Disclosures About Market Risk         40

                        Part II - Other Information

Item 1. Legal Proceedings                                                  41

Item 2. Changes in Securities and Use of Proceeds                          42

Item 6. Exhibits and Reports on Form 8-K                                   43

Exhibit Index                                                              44

Signatures                                                                 46
</TABLE>


                                       2
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
                      (in millions, except per share data)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED         SIX MONTHS ENDED
                                                                       JUNE 30,                  JUNE 30,
                                                                  2002         2001         2002         2001
                                                                -------      -------      -------      -------
<S>                                                             <C>          <C>          <C>          <C>
REVENUES
Premiums                                                        $ 2,756      $ 2,291      $ 5,341      $ 4,523
Net investment income                                               465          518          953        1,047
Fee income                                                          109           84          212          162
Realized investment gains (losses)                                  (36)          50           (7)         242
Other revenues                                                       26           40           54           67
                                                                -------      -------      -------      -------
  Total revenues                                                  3,320        2,983        6,553        6,041
                                                                -------      -------      -------      -------

CLAIMS AND EXPENSES
Claims and claim adjustment expenses                              2,094        1,757        4,080        3,382
Amortization of deferred acquisition costs                          447          374          873          723
Interest expense                                                     40           52           76          118
General and administrative expenses                                 304          330          634          680
                                                                -------      -------      -------      -------
  Total claims and expenses                                       2,885        2,513        5,663        4,903
                                                                -------      -------      -------      -------

Income before federal income taxes and cumulative
  effect of changes in accounting principles                        435          470          890        1,138
Federal income taxes                                                103          125          213          319
                                                                -------      -------      -------      -------

INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN
  ACCOUNTING PRINCIPLES                                             332          345          677          819
Cumulative effect of change in accounting for:
  Goodwill and other intangible assets, net of tax                   --           --         (243)          --
  Derivative instruments and hedging activities, net of tax          --           --           --            4
  Securitized financial assets, net of tax                           --           (1)          --           (1)
                                                                -------      -------      -------      -------
NET INCOME                                                      $   332      $   344      $   434      $   822
                                                                =======      =======      =======      =======

BASIC AND DILUTED EARNINGS PER SHARE
Income before cumulative effect of changes in
  accounting principles                                         $  0.33      $  0.45      $  0.75      $  1.06
Cumulative effect of changes in accounting principles                --           --        (0.27)        0.01
                                                                -------      -------      -------      -------

Net income                                                      $  0.33      $  0.45      $  0.48      $  1.07
                                                                =======      =======      =======      =======

Weighted average number of common shares outstanding
  and common stock equivalents (basic and diluted)              1,000.0        769.0        897.9        769.0
                                                                =======      =======      =======      =======
</TABLE>

           See notes to condensed consolidated financial statements.


                                       3
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                 (in millions, except shares and per share data)

<TABLE>
<CAPTION>
                                                                                       JUNE 30,
                                                                                         2002         DECEMBER 31,
                                                                                      (UNAUDITED)         2001
                                                                                      -----------     ------------
<S>                                                                                   <C>             <C>
ASSETS
Fixed maturities, available for sale at fair value (including $770 and $976 subject
  to securities lending agreements) (amortized cost $26,201 and $25,461)                $26,778          $25,851
Equity securities, at fair value (cost $992 and $1,079)                                     993            1,083
Mortgage loans                                                                              262              274
Real estate held for sale                                                                    39               38
Short-term securities                                                                     2,964            2,798
Trading securities, at fair value                                                           338              628
Other investments                                                                         1,995            1,947
                                                                                        -------          -------
  Total investments                                                                      33,369           32,619
                                                                                        -------          -------

Cash                                                                                        228              237
Investment income accrued                                                                   348              360
Premium balances receivable                                                               3,866            3,657
Reinsurance recoverables                                                                 10,991           11,047
Deferred acquisition costs                                                                  849              768
Deferred federal income taxes                                                             1,097            1,182
Contractholder receivables                                                                2,171            2,198
Goodwill                                                                                  2,412            2,577
Other assets                                                                              4,055            3,133
                                                                                        -------          -------
  Total assets                                                                          $59,386          $57,778
                                                                                        =======          =======

LIABILITIES
Claims and claim adjustment expense reserves                                            $30,735          $30,737
Unearned premium reserves                                                                 6,143            5,667
Contractholder payables                                                                   2,171            2,198
Notes payable to affiliates                                                               1,500            1,697
Long-term debt                                                                              380              380
Convertible junior subordinated notes payable                                               867               --
Other liabilities                                                                         6,426            5,513
                                                                                        -------          -------
  Total liabilities                                                                      48,222           46,192
                                                                                        -------          -------

TIGHI-obligated mandatorily redeemable securities of subsidiary trusts
  holding solely junior subordinated debt securities of TIGHI                               900              900
                                                                                        -------          -------

SHAREHOLDERS' EQUITY
Common Stock:
   Class A, $.01 par value, 1,500 million shares authorized, 500 million issued
     and outstanding at June 30, 2002; 269 million
     issued and outstanding at December 31, 2001                                              5                3
   Class B, $.01 par value, 1,500 million shares authorized,
     500 million issued and outstanding                                                       5                5
Additional paid-in capital                                                                8,538            4,432
Retained earnings                                                                         1,343            6,004
Accumulated other changes in equity from nonowner sources                                   373              242
                                                                                        -------          -------
  Total shareholders' equity                                                             10,264           10,686
                                                                                        -------          -------
  Total liabilities and shareholders' equity                                            $59,386          $57,778
                                                                                        =======          =======
</TABLE>

           See notes to condensed consolidated financial statements.


                                       4
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED STATEMENT OF
                   CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
                                  (in millions)

<TABLE>
<CAPTION>
For the Six Months Ended June 30, 2002                                       DOLLARS       SHARES
                                                                            --------       ------
<S>                                                                         <C>            <C>
COMMON STOCK AND ADDITIONAL PAID IN CAPITAL
Balance, beginning of period                                                $  4,440          769
Net proceeds from initial public offering                                      4,090          231
Other                                                                             18           --
                                                                            --------        -----
Balance, end of period                                                         8,548        1,000
                                                                            --------        -----

RETAINED EARNINGS
Balance, beginning of period                                                   6,004
Net income                                                                       434
Receipts from former subsidiary                                                  158
Dividends                                                                     (5,253)
                                                                            --------
Balance, end of period                                                         1,343
                                                                            --------

ACCUMULATED OTHER CHANGES IN EQUITY FROM NONOWNER SOURCES, NET OF TAX
Balance, beginning of period                                                     242
Net unrealized gain on investment securities                                     121
Other (1)                                                                         10
                                                                            --------
Balance, end of period                                                           373
                                                                            --------        -----

    Total shareholders' equity and shares outstanding                       $ 10,264        1,000
                                                                            ========        =====
</TABLE>

(1)   Includes foreign currency translation adjustments and hedged future
      contracts.

           See notes to condensed consolidated financial statements.


                                       5
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
                                  (in millions)

<TABLE>
<CAPTION>
For the Six Months Ended June 30,                                2002         2001
                                                               -------      -------
<S>                                                            <C>          <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES                      $ 1,109      $   251
                                                               -------      -------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from maturities of investments
    Fixed maturities                                             1,193          939
    Mortgage loans                                                  13            9
  Proceeds from sales of investments
    Fixed maturities                                             6,726        7,972
    Equity securities                                              216          287
  Purchases of investments
    Fixed maturities                                            (8,797)      (9,056)
    Equity securities                                             (128)        (137)
    Real estate held for sale                                       (5)          (4)
 Short-term securities, (purchases) sales, net                    (166)         673
 Other investments, net                                            463         (185)
 Securities transactions in course of settlement                    37         (156)
                                                               -------      -------
       Net cash provided by (used in) investing activities        (448)         342
                                                               -------      -------

CASH FLOWS FROM FINANCING ACTIVITIES
  Issuance of short-term debt                                       --          212
  Issuance of long-term debt to affiliate                           --          275
  Issuance of convertible notes, net                               867           --
  Payment of long-term debt                                         --         (500)
  Payment on note payables to affiliates                        (5,299)        (540)
  Initial public offering                                        4,090           --
  Receipts from former affiliates                                  158          316
  Dividend to parent                                              (158)        (369)
 Purchase of real estate from an affiliate                         (68)          --
 Transfer of employee benefit obligations to affiliates           (172)          --
 Transfer of lease obligations to an affiliate                     (88)          --
                                                               -------      -------
     Net cash used in financing activities                        (670)        (606)
                                                               -------      -------

Net decrease in cash                                                (9)         (13)
Cash at beginning of period                                        237          196
                                                               -------      -------
Cash at end of period                                          $   228      $   183
                                                               =======      =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

  Income taxes paid                                            $   105      $   390
  Interest paid                                                $    41      $    57
                                                               -------      -------
</TABLE>

            See notes to condensed consolidated financial statements


                                       6
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)

1.    General

      The interim condensed consolidated financial statements include the
      accounts of Travelers Property Casualty Corp. (formerly known as The
      Travelers Insurance Group Inc.) (TPC) an indirect majority-owned
      subsidiary of Citigroup Inc. (Citigroup) and its subsidiaries
      (collectively, the Company). These financial statements are prepared in
      conformity with accounting principles generally accepted in the United
      States of America (GAAP) and are unaudited. In the opinion of the
      Company's management, all adjustments, consisting of normal recurring
      adjustments, necessary for a fair presentation have been reflected. The
      accompanying condensed consolidated financial statements should be read in
      conjunction with the consolidated financial statements and related notes
      for the year ended December 31, 2001, included in the Company's
      Registration Statement on Form S-1, which was declared effective on March
      21, 2002 (Registration No. 333-82388).

      TPC was reorganized in connection with its initial public offering (IPO)
      in March 2002. Pursuant to the reorganization, which was completed on
      March 19, 2002, TPC's consolidated financial statements have been adjusted
      to exclude the accounts of certain wholly-owned TPC subsidiaries,
      principally The Travelers Insurance Company (TIC) and its subsidiaries
      (U.S. life insurance operations), certain other wholly-owned non-insurance
      subsidiaries of TPC and substantially all of TPC's assets and certain
      liabilities not related to the property casualty business.

      Citigroup has announced that, on or about August 20, 2002, it will make a
      tax-free distribution to Citigroup's stockholders of a portion of
      Citigroup's ownership interest in TPC, which, together with the shares
      issued in the IPO, will represent more than 90% of TPC's common equity and
      more than 90% of the combined voting power of TPC's then outstanding
      voting securities. Immediately following the distribution, Citigroup will
      remain a holder of slightly less than 10% of TPC's common equity and
      slightly less than 10% of the combined voting power of TPC's then
      outstanding voting securities. Citigroup estimates that for each 100
      shares of Citigroup common stock approximately 4.32 shares of class A
      common stock and 8.89 shares of class B common stock will be distributed.
      Citigroup has received a private letter ruling from the Internal Revenue
      Service that the distribution will be tax-free to Citigroup, its
      stockholders and TPC. As part of the ruling process, Citigroup agreed to
      vote the shares it continues to hold following the distribution pro rata
      with the shares held by the public and to divest the remaining shares it
      holds within five years following the distribution.

      TPC's consolidated financial statements include the accounts of its
      primary subsidiary, Travelers Insurance Group Holdings Inc. (formerly
      known as Travelers Property Casualty Corp.) (TIGHI), a property casualty
      insurance holding company. Also included are the accounts of CitiInsurance
      International Holdings Inc. and its subsidiaries (CitiInsurance), the
      principal assets of which are investments in the property casualty and
      life operations of Fubon Insurance Co., Ltd. and Fubon Assurance Co.,
      Ltd., with respect to results prior to March 1, 2002. On February 28,
      2002, the Company sold CitiInsurance to other Citigroup affiliated
      companies for $403 million, its net book value. The Company has applied
      $138 million of the proceeds from this sale to repay intercompany
      indebtedness to Citigroup. In addition, the Company has purchased from
      Citigroup affiliated companies the premises located at One Tower Square,
      Hartford, Connecticut and other properties for $68 million. Additionally,
      certain liabilities relating to employee benefit plans and lease
      obligations were assigned and assumed by Citigroup affiliated companies.
      In connection with these assignments, the Company transferred $172 million
      and $88 million, respectively, to Citigroup affiliated companies.


                                       7
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

1.    General, Continued

      In March 2002, TPC issued 231 million shares of its class A common stock
      in an initial public offering (IPO), representing approximately 23% of
      TPC's common equity. After the IPO, Citigroup beneficially owned all of
      the 500 million shares of TPC's outstanding class B common stock, each
      share of which is entitled to seven votes, and 269 million shares of TPC's
      class A common stock, each of which is entitled to one vote, representing
      94% of the combined voting power of all classes of TPC's voting securities
      and 77% of the equity interest in TPC. Concurrent with the IPO, TPC issued
      $893 million aggregate principal amount of 4.5% convertible junior
      subordinated notes which mature on April 15, 2032. The IPO and the
      offering of the convertible notes are collectively referred to as the
      offerings. During the first quarter of 2002, TPC paid three dividends of
      $1.0 billion, $3.7 billion and $395 million, aggregating $5.1 billion,
      which were each in the form of notes payable. The proceeds of the
      offerings were used to prepay the $395 million note and substantially
      prepay the $3.7 billion note.

      In conjunction with the corporate reorganization and the offerings
      described above, during March 2002, the Company entered into an agreement
      with Citigroup which provides that in any year that the Company records
      additional asbestos-related income statement charges in excess of $150
      million, net of any reinsurance, Citigroup will pay to the Company the
      amount of any such excess up to a cumulative aggregate of $800 million,
      reduced by the tax effect of the highest applicable federal income tax
      rate.

      The Company provides and purchases services to and from affiliates,
      including facilities management, banking and financial functions, benefit
      coverages, data processing services, and a short-term investment pool.
      Charges for these shared services are allocated at cost. In connection
      with the announced tax-free distribution by Citigroup, the Company is
      negotiating with Citigroup the terms of a transition services agreement
      for the provision of these services, a tradename and trademark
      agreement related to the use of trademarks, logos and tradenames and is
      negotiating an amendment to the March 26, 2002 Intercompany Agreement with
      Citigroup. During the first quarter of 2002, Citigroup provided investment
      advisory services on an allocated cost basis, consistent with prior years.
      The Company has entered into an investment management agreement dated
      August 6, 2002, which has been applied retroactive to April 1, 2002, with
      an affiliate of Citigroup whereby the affiliate of Citigroup will provide
      investment advisory services to the Company with respect to its entire
      investment portfolio for a period of two years and at fees mutually agreed
      upon, including a component based on performance. The Company anticipates
      that these fees will be higher than prior period allocated costs. Either
      party may terminate the agreement effective on or after March 31, 2003
      upon 90 days prior notice. The Company and Citigroup have also agreed upon
      the allocation or transfer of certain liabilities and assets, and rights
      and obligations in furtherance of the separation of operations and
      ownership contemplated as a result of the distribution. The net effect
      of these allocations and transfers, in the opinion of management, will not
      be significant to the Company's results of operations or financial
      condition.

      Certain financial information that is normally included in annual
      financial statements prepared in accordance with GAAP, but that is not
      required for interim reporting purposes, has been condensed or omitted.

2.    Changes in Accounting Principles

      Business Combinations, Goodwill and Other Intangible Assets

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


                                       8
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

2.    Changes in Accounting Principles, Continued

      The Company stopped amortizing goodwill on January 1, 2002. Net income and
      earnings per share adjusted to exclude goodwill amortization expense for
      the three and six months ended June 30, 2001 are as follows:

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED   SIX MONTHS ENDED
      (in millions, except per share data)         JUNE 30, 2001       JUNE 30, 2001
                                                ------------------   ----------------
<S>                                             <C>                  <C>
      NET INCOME
       Reported net income                            $   344            $   822
       Goodwill amortization                               18                 36
                                                      -------            -------
       Adjusted net income                            $   362            $   858
                                                      =======            =======

      BASIC AND DILUTED EARNINGS PER SHARE
       Reported earnings per share                    $  0.45            $  1.07
       Goodwill amortization                             0.02               0.05
                                                      -------            -------
       Adjusted earnings per share                    $  0.47            $  1.12
                                                      =======            =======
</TABLE>

      During the quarter ended March 31, 2002, the Company performed the
      transitional impairment tests using the fair value approach required by
      FAS 142. Based on these tests, the Company impaired $220 million of
      goodwill and $23 million of indefinite-lived intangible assets
      representing the value of insurance operating licenses, all attributable
      to The Northland Company and subsidiaries (Northland), as a cumulative
      catch-up adjustment as of January 1, 2002. The fair value of the Northland
      reporting unit was based on the use of a multiple of earnings model. The
      fair value of Northland's indefinite-lived intangible assets was based on
      the present value of estimated net cash flows.

      The Company had customer-related intangible assets with a gross carrying
      amount of $471 million as of both June 30, 2002 and December 31, 2001, and
      with accumulated amortization of $73 million and $55 million as of June
      30, 2002 and December 31, 2001, respectively, which are included in other
      assets in the condensed consolidated balance sheet. Amortization expense
      was $9 million for both of the three month periods ended June 30, 2002 and
      2001, respectively, and was $18 million for both of the six month periods
      ended June 30, 2002 and 2001, respectively. Intangible assets amortization
      expense is estimated to be $18 million for the remainder of 2002, $35
      million in 2003, $34 million in 2004, $31 million in 2005 and $30 million
      in each of 2006 and 2007.

      Impairment or Disposal of Long-Lived Assets

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


                                       9
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

2.    Changes in Accounting Principles, Continued

      Accounting by Certain Entities (Including Entities With Trade Receivables)
      That Lend to or Finance the Activities of Others

      Effective January 1, 2002, the Company adopted SEC Statement of Position
      01-06, "Accounting by Certain Entities (Including Entities With Trade
      Receivables) That Lend to or Finance the Activities of Others" (SOP
      01-06). This SOP applies to any entity that lends to or finances the
      activities of others. SOP 01-06 clarifies that accounting and financial
      reporting practices for lending and financing activities should be the
      same regardless of the type of entity engaging in those activities. SOP
      01-06 provides certain presentation and disclosure changes for entities
      with trade receivables as part of the objective of requiring consistent
      accounting and reporting for like transactions. This SOP also provides
      specific guidance for other types of transactions specific to certain
      financial institutions. To the extent an entity is not considered such a
      financial institution, the other guidance provided is not applicable. The
      adoption of this SOP did not have a significant impact on the Company's
      results of operations, financial condition or liquidity.

      Accounting for Derivative Instruments and Hedging Activities

      Effective January 1, 2001, the Company adopted FASB Statement of Financial
      Accounting Standards No. 133, "Accounting for Derivative Instruments and
      Hedging Activities" (FAS 133). FAS 133 establishes accounting and
      reporting standards for derivative instruments, including certain
      derivative instruments embedded in other contracts (collectively referred
      to as derivatives), and for hedging activities. It requires that an entity
      recognize all derivatives as either assets or liabilities in the
      consolidated balance sheet and measure those instruments at fair value. If
      certain conditions are met, a derivative may be specifically designated as
      (a) a hedge of the exposure to changes in the fair value of a recognized
      asset or liability or an unrecognized firm commitment, (b) a hedge of the
      exposure to variable cash flows of a recognized asset or liability or of a
      forecasted transaction, or (c) a hedge of the foreign currency exposure of
      a net investment in a foreign operation, an unrecognized firm commitment,
      an available-for-sale security, or a foreign-currency-denominated
      forecasted transaction. The accounting for changes in the fair value of a
      derivative (that is, gains and losses) depends on the intended use of the
      derivative and the resulting designation.

      As a result of adopting FAS 133, the Company recorded a benefit of $4
      million after tax, reflected as a cumulative catch-up adjustment in the
      condensed consolidated statement of income and a charge of $4 million
      after tax, reflected as a cumulative catch-up adjustment in the
      accumulated other changes in equity from nonowner sources section of
      shareholders' equity. In addition, the Company redesignated certain
      investments as trading from available for sale in accordance with the
      transition provisions of FAS 133 resulting in a gross gain of $8 million
      after tax, reflected in realized investment gains (losses).

      Recognition of Interest Income and Impairment on Purchased and Retained
      Beneficial Interests in Securitized Financial Assets.

      Effective April 1, 2001, the Company adopted FASB Emerging Issues Task
      Force (EITF) 99-20, "Recognition of Interest Income and Impairment on
      Purchased and Retained Beneficial Interests in Securitized Financial
      Assets" (EITF 99-20). EITF 99-20 provides new guidance on the recognition
      and measurement of interest income and impairment on certain investments,
      e.g., certain asset-backed securities. The recognition of impairment
      resulting from the adoption of EITF 99-20 is to be recorded as a
      cumulative catch-up adjustment as of the beginning of the fiscal quarter
      in which it is adopted. Interest income on beneficial interests falling
      within the scope of EIFT 99-20 is to be recognized prospectively. As a
      result of adopting EITF 99-20, the Company recorded a charge of $1 million
      after tax, reflected as a cumulative catch-up adjustment. The
      implementation of this EITF did not have a significant impact on results
      of operations, financial condition or liquidity.


                                       10
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

3.    Accounting Standards Not Yet Adopted

      Asset Retirement Obligations

      In June 2001, the FASB issued Statement of Financial Accounting Standards
      No. 143, "Accounting for Asset Retirement Obligations" (FAS 143). FAS 143
      changes the measurement of an asset retirement obligation from a
      cost-accumulation approach to a fair value approach, where the fair value
      (discounted value) of an asset retirement obligation is recognized as a
      liability in the period in which it is incurred and accretion expense is
      recognized using the credit-adjusted risk-free interest rate in effect
      when the liability was initially recognized. The associated asset
      retirement costs are capitalized as part of the carrying amount of the
      long-lived asset and subsequently amortized into expense. The pre-FAS 143
      prescribed practice of reporting a retirement obligation as a contra-asset
      will no longer be allowed. The Company does not expect the impact of this
      new standard, which will take effect in January 2003, to be significant.

      Accounting for Costs Associated with Exit or Disposal Activities

      In June 2002, the FASB issued Statement of Financial Accounting Standards
      No. 146, "Accounting for Costs Associated with Exit or Disposal
      Activities" (FAS 146). FAS 146 requires that a liability for costs
      associated with exit or disposal activities be recognized when the
      liability is incurred. Existing generally accepted accounting principles
      provide for the recognition of such costs at the date of management's
      commitment to an exit plan. In addition, FAS 146 requires that the
      liability be measured at fair value and be adjusted for changes in
      estimated cash flows. The provisions of the new standard are effective for
      exit or disposal activities initiated after December 31, 2002. The Company
      does not expect the impact of this new standard to be significant.


                                       11
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

4.    Segment Information

<TABLE>
<CAPTION>
                                                                                                          TOTAL
                                                                   COMMERCIAL        PERSONAL        REPORTABLE
      (at and for the three months ended June 30, in millions)          LINES           LINES          SEGMENTS
                                                                   ----------        --------        ----------
<S>                                                                <C>               <C>             <C>
      2002
      Revenues
         Premiums                                                     $ 1,688         $ 1,068          $  2,756
         Net investment income                                            369              96               465
         Fee income                                                       109              --               109
         Realized investment gains (losses)                                 9             (45)              (36)
         Other                                                              7              19                26
                                                                      -------         -------          --------
           Total revenues                                             $ 2,182         $ 1,138          $  3,320
                                                                      =======         =======          ========

      Operating income (1)                                            $   311         $    70          $    381
      Assets                                                           50,101           8,956            59,057
                                                                      -------         -------          --------

      2001
      Revenues
         Premiums                                                     $ 1,312         $   979          $  2,291
         Net investment income                                            416             103               519
         Fee income                                                        84              --                84
         Realized investment gains                                         49              --                49
         Other                                                             23              18                41
                                                                      -------         -------          --------
           Total revenues                                             $ 1,884         $ 1,100          $  2,984
                                                                      =======         =======          ========

      Operating income (1)                                            $   302         $    50          $    352
      Assets                                                           44,663           8,023            52,686
                                                                      -------         -------          --------
</TABLE>

      (1)   Operating income excludes realized investment gains (losses),
            restructuring charges and the cumulative effect of changes in
            accounting principles, and is reflected net of tax.


                                       12
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

4.    Segment Information, Continued

<TABLE>
<CAPTION>
                                                                                                          TOTAL
                                                                   COMMERCIAL        PERSONAL        REPORTABLE
      (at and for the three months ended June 30, in millions)          LINES           LINES          SEGMENTS
                                                                   ----------        --------        ----------
<S>                                                                <C>               <C>             <C>
      2002
      Revenues
         Premiums                                                     $ 3,243         $ 2,098          $  5,341
         Net investment income                                            752             200               952
         Fee income                                                       212              --               212
         Realized investment gains (losses)                                50             (57)               (7)
         Other                                                             13              40                53
                                                                      -------         -------          --------
           Total revenues                                             $ 4,270         $ 2,281          $  6,551
                                                                      =======         =======          ========

      Operating income (1)                                            $   588         $   141          $    729
      Assets                                                           50,101           8,956            59,057
                                                                      -------         -------          --------

      2001
      Revenues
         Premiums                                                     $ 2,601         $ 1,922          $  4,523
         Net investment income                                            833             217             1,050
         Fee income                                                       162              --               162
         Realized investment gains                                        226              16               242
         Other                                                             31              36                67
                                                                      -------         -------          --------
           Total revenues                                             $ 3,853         $ 2,191          $  6,044
                                                                      =======         =======          ========

      Operating income (1)                                            $   603         $   146          $    749
      Assets                                                           44,663           8,023            52,686
                                                                      -------         -------          --------
</TABLE>

      (1)   Operating income excludes realized investment gains (losses),
            restructuring charges and the cumulative effect of changes in
            accounting principles, and is reflected net of tax.


                                       13
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

4.    Segment Information, Continued

      BUSINESS SEGMENT RECONCILIATION

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED      SIX MONTHS ENDED
                                                                  JUNE 30,               JUNE 30,
      (in millions)                                           2002       2001       2002       2001
                                                             -----      -----      -----      -----
<S>                                                          <C>        <C>        <C>        <C>
      INCOME RECONCILIATION, NET OF TAX
      Total operating income for reportable segments         $ 381      $ 352      $ 729      $ 749
      Other operating loss (1)                                 (24)       (38)       (46)       (86)
      Realized investment gains (losses)                       (24)        33         (4)       158
      Restructuring charges                                     (1)        (2)        (2)        (2)
      Cumulative effect of changes in accounting for:
        Goodwill and other intangible assets, net of tax        --         --       (243)        --
        Derivative instruments and hedging activities           --         --         --          4
        Securitized financial assets                            --         (1)        --         (1)
                                                             -----      -----      -----      -----
      Total consolidated net income                          $ 332      $ 344      $ 434      $ 822
                                                             =====      =====      =====      =====
</TABLE>

      (1)   The primary component of the other operating loss is after-tax
            interest expense of $26 million and $34 million for the three months
            ended June 30, 2002 and 2001, respectively, and $49 million and $77
            million for the six months ended June 30, 2002 and 2001,
            respectively.

5.    Changes in Equity from Nonowner Sources

      The Company's total changes in equity from nonowner sources are as
      follows:

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED      SIX MONTHS ENDED
                                                                  JUNE 30,               JUNE 30,
      (in millions)                                           2002       2001       2002       2001
                                                             -----      -----      -----      -----
<S>                                                          <C>        <C>        <C>        <C>
      Net income                                              $332      $ 344       $434       $822
      Net unrealized gain (loss) on securities                 291       (150)       121        (77)
      Other (1)                                                  9          1         10         (1)
      Cumulative effect of changes in accounting for
       derivative instruments and hedging activities            --         --         --         (4)
                                                              ----      -----       ----       ----
       Total changes in equity from nonowner sources          $632      $ 195       $565       $740
                                                              ====      =====       ====       ====
</TABLE>

      (1)   Includes foreign currency translation adjustments and hedged future
            contracts.

6.    Earnings per Share (EPS)

      Basic EPS is computed by dividing income available to common stockholders
      by the weighted average number of common shares available during the
      period. Diluted EPS reflects the effect of potentially dilutive
      securities, principally the incremental shares assumed issued under the
      Company's Stock Incentive Plan. Excluded from the computation of diluted
      EPS were 39 million of potentially dilutive shares related to convertible
      junior subordinated notes (see note 7) because the contingency conditions
      for their issuance have not been satisfied. Shares have been adjusted for
      all periods to give effect to the recapitalization in March 2002, prior to
      the IPO, whereby the outstanding shares of common stock (1,500 shares)
      were changed into 269 million shares of class A common stock and 500
      million shares of class B common stock. For the three and six months ended
      June 30, 2002 and 2001, there was no significant effect on EPS from
      potentially dilutive securities.


                                       14
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

7.    Capital and Debt

      In conjunction with its purchase of TIGHI's outstanding shares in April
      2000, TPC entered into a note agreement with Citigroup. On February 7,
      2002, this note agreement was replaced by a new note agreement. Under the
      terms of the new note agreement, interest accrued on the aggregate
      principal amount outstanding at the commercial paper rate (the then
      current short-term rate) plus 10 basis points per annum. Interest was
      compounded monthly. This note was prepaid following the offerings.

      TIGHI has a $500 million line of credit agreement (the line of credit)
      with Citicorp Banking Corporation, an affiliate. The line of credit
      expires in December 2006. At June 30, 2002, TIGHI had $500 million of
      borrowings outstanding under the line of credit at an interest rate of
      3.6% and with payment due in November 2003.

      TIGHI has a $250 million revolving line of credit from Citigroup. TIGHI
      pays a commitment fee to Citigroup for that line of credit, which expires
      in 2006. The interest rate for borrowings under this committed line is
      based on the cost of commercial paper issued by Citicorp. At June 30,
      2002, there were no outstanding borrowings under this revolving line of
      credit.

      In February 2002, TPC paid a dividend of $1.0 billion to Citigroup in the
      form of a non-interest bearing note payable on December 31, 2002. This
      note will begin to accrue interest from December 31, 2002 on any
      outstanding balance at the floating rate of the base rate of Citibank,
      N.A., New York City plus 2.0%. The Company expects to repay this note from
      current year earnings, to the extent available.

      In February 2002, TPC also paid a dividend of $3.7 billion to Citigroup in
      the form of a note payable in two installments. This note was
      substantially prepaid following the offerings. The balance of $150 million
      was due on May 9, 2004. This note would have begun to bear interest from
      May 9, 2002 at a rate of 7.25% per annum. This note was prepaid on May 8,
      2002.

      In March 2002, TPC paid a dividend of $395 million to Citigroup in the
      form of a note which would have begun to bear interest after May 9, 2002
      at a rate of 6.0% per annum. This note was prepaid following the
      offerings.

      In March 2002, TPC sold 231 million shares of its class A common stock in
      the IPO, representing approximately 23% of the Company's common equity,
      for total proceeds of $4.3 billion.

      In March 2002, TPC issued $893 million aggregate principal amount of 4.5%
      convertible junior subordinated notes which will mature on April 15, 2032,
      unless earlier redeemed, repurchased or converted. Interest is payable
      quarterly in arrears. TPC has the option to defer interest payments on the
      notes for a period not exceeding 20 consecutive interest periods nor
      beyond the maturity of the notes. During a deferral period, the amount of
      interest due to holders of the notes will continue to accumulate, and such
      deferred interest payments will themselves accrue interest. Deferral of
      any interest can create certain restrictions for TPC.


                                       15
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

7.    Capital and Debt, Continued

      Unless previously redeemed or repurchased, the notes are convertible into
      shares of class A common stock at the option of the holders at any time
      after March 27, 2003 and prior to April 15, 2032 if at any time (1) the
      average of the daily closing prices of class A common stock for the 20
      consecutive trading days immediately prior to the conversion date is at
      least 20% above the then applicable conversion price on the conversion
      date, (2) the notes have been called for redemption, (3) specified
      corporate transactions have occurred, or (4) specified credit rating
      events with respect to the notes have occurred. The notes will be
      convertible into shares of class A common stock at a conversion rate of
      1.0808 shares of class A common stock for each $25 principal amount of
      notes (equivalent to an initial conversion price of $23.13 per share of
      class A common stock), subject to adjustment in certain events. From March
      27, 2003, and until the next business day following the date of the
      distribution (provided that the distribution has not occurred by March 27,
      2003), TPC may elect to make a cash settlement in respect of any notes
      surrendered for conversion.

      On or after April 18, 2007, the notes may be redeemed at TPC's option. TPC
      is not required to make mandatory redemption or sinking fund payments with
      respect to the notes.

      The notes are general unsecured obligations and are subordinated in right
      of payment to all existing and future Senior Indebtedness. The notes are
      also effectively subordinated to all existing and future indebtedness and
      other liabilities of any of TPC's current or future subsidiaries.

      During May 2002, TPC fully and unconditionally guaranteed the payment of
      all principal, premiums, if any, and interest on certain debt obligations
      of it's wholly-owned subsidiary TIGHI. TPC is deemed to have no
      independent assets or operations except for its wholly-owned subsidiary
      TIGHI. Consolidated financial statements of TIGHI have not been presented
      herein or in any separate reports filed with the Securities and Exchange
      Commission because management has determined that such financial
      statements would not be material to holders of TIGHI debt. The guarantees
      pertain to the $150 million 6.75% Notes due 2006 and the $200 million
      7.75% Notes due 2026 included in long-term debt and the $900 million of
      TIGHI-obligated mandatorily redeemable securities of subsidiary trusts
      holding solely junior subordinated debt securities of TIGHI (TIGHI
      Securities). TIGHI has the right, at any time, to defer distributions on
      the TIGHI Securities for a period not exceeding 20 consecutive quarterly
      interest periods (though such distributions would continue to accrue
      interest during any such extended payment period). TIGHI cannot pay
      dividends during such deferments.

      TPC's insurance subsidiaries are subject to various regulatory
      restrictions that limit the maximum amount of dividends to be paid to
      their parent without prior approval of insurance regulatory authorities.
      TPC's insurance subsidiaries paid dividends of $550 million to TIGHI
      during the first six months of 2002. Any dividends to be paid
      during the remainder of 2002 may be subject to approval by the Connecticut
      Insurance Department.


                                       16
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

8.    Commitments and Contingencies

      In 1996, Lloyd's of London (Lloyd's) restructured its operations with
      respect to claims for years prior to 1993 and reinsured these into Equitas
      Limited (Equitas). The outcome of the restructuring of Lloyd's is
      uncertain and the impact, if any, on collectibility of amounts recoverable
      by the Company from Equitas cannot be quantified at this time. It is
      possible that an unfavorable impact on collectibility could have a
      material adverse effect on the Company's results of operations in a future
      period. However, in the opinion of the Company's management, it is not
      likely that the outcome would have a material adverse effect on the
      Company's financial condition or liquidity. The Company carries an
      allowance for uncollectible reinsurance which is not allocated to any
      specific proceedings or disputes, whether for financial impairments or
      coverage defenses. Including this allowance, in the opinion of the
      Company's management, the net receivable from reinsurance contracts is
      fairly stated.

      It is difficult to estimate the reserves for environmental claims and
      asbestos-related claims and related litigation due to the vagaries of
      court coverage decisions, plaintiffs' expanded theories of liability, the
      risks inherent in major litigation and other uncertainties, including
      without limitation, those which are set forth below. Conventional
      actuarial techniques are not used to estimate such reserves.

      Because each insured presents different liability and coverage issues, the
      Company evaluates the exposure presented by each insured on an
      insured-by-insured basis. In the course of this evaluation, the Company
      considers: available insurance coverage, including the role any umbrella
      or excess insurance the Company has issued to the insured; limits and
      deductibles; an analysis of each insured's potential liability; the
      jurisdictions involved; past and anticipated future claim activity and
      loss development on pending claims; past settlement values of similar
      claims; allocated claim adjustment expense; potential role of other
      insurance; the role, if any, of non-asbestos claims or potential
      non-asbestos claims in any resolution process; and applicable coverage
      defenses or determinations, if any, including the determination as to
      whether or not an asbestos claim is a products/completed operation claim
      subject to an aggregate limit and the available coverage, if any, for that
      claim. Once the gross ultimate exposure for indemnity and allocated claim
      adjustment expense is determined for each insured by each policy year, the
      Company calculates a ceded reinsurance projection based on any applicable
      facultative and treaty reinsurance, as well as past ceded experience.
      Adjustments to the ceded projections also occur due to actual ceded claim
      experience and reinsurance collections. The Company's evaluations have not
      resulted in any meaningful data from which an average asbestos defense or
      indemnity payment may be determined.

      The Company also compares its historical direct and net loss and expense
      paid experience, year-by-year, to assess any emerging trends, fluctuations
      or characteristics suggested by the aggregate paid activity. The
      comparison includes a review of the result derived from the division of
      the ending direct and net reserves by last year's direct and net paid
      activity, also known as the survival ratio. Losses paid, both direct and
      ceded, have increased in the first six months of 2002 compared to the
      first six months of 2001 primarily as a result of two factors. In the
      second quarter of 2001 there was a substantial one time recovery related
      to a prior year claim payment. In addition, there has been an acceleration
      in recent quarters in the rate of payments arising from prior settlements
      of coverage disputes entered into between the Company and certain of its
      policyholders. As part of the Company's ongoing review and analysis of its
      reserve levels, the Company will continue to closely monitor these trends
      and adjust its reserve levels in the future if appropriate.

                                       17
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

8.    Commitments and Contingencies, Continued

      As a result of the processes and procedures described above, the reserves
      carried for environmental and asbestos claims at June 30, 2002 are the
      Company's best estimate of ultimate claims and claim adjustment expenses
      based upon known facts and current law. However, the uncertainties
      surrounding the final resolution of these claims continue, which may
      result in the estimates being subject to revision as new information
      becomes available. These include, without limitation, the risks and lack
      of predictability inherent in major litigation, any impact from the
      bankruptcy protection sought by various asbestos producers and other
      asbestos defendants, a further increase or decrease in asbestos and
      environmental claims which cannot now be anticipated, the role of any
      umbrella or excess policies the Company has issued, the resolution or
      adjudication of some disputes pertaining to the amount of available
      coverage for asbestos claims in a manner inconsistent with the Company's
      previous assessment of these claims, the number and outcome of direct
      actions against the Company, and future developments pertaining to the
      Company's ability to recover reinsurance for environmental and asbestos
      claims. It is also not possible to predict changes in the legal and
      legislative environment and their impact on the future development of
      asbestos and environmental claims. This development will be affected by
      future court decisions and interpretations, as well as changes in
      applicable legislation. It is also difficult to predict the ultimate
      outcome of large claims coverage disputes until settlement negotiations
      near completion and significant legal questions are resolved or, failing
      settlement, until the dispute is adjudicated. This is particularly the
      case with insureds in bankruptcy where negotiations often involve a large
      number of claimants and other parties and require court approval to be
      effective.

      Because of the uncertainties set forth above, additional liabilities may
      arise for amounts in excess of the current related reserves. These
      additional amounts, or a range of these additional amounts, cannot now be
      reasonably estimated and could result in liability exceeding the related
      reserves by an amount that could be material to the Company's operating
      results and financial condition in future periods. Because the level of
      uncertainty continues to increase and in order to strengthen the Company's
      ability and flexibility to advance its strategic goals following its
      initial public offering, Citigroup has entered into an agreement under
      which it will provide TPC with significant financial support for asbestos
      claims and related litigation, in any year that the Company's insurance
      subsidiaries record asbestos-related income statement charges in excess of
      $150 million, net of any reinsurance up to a cumulative aggregate of $800
      million, reduced by the tax effect of the highest applicable federal
      income tax rate.

      In May 2002, the Company agreed with approximately three dozen insurers
      and PPG Industries, Inc. (PPG) on key terms to settle asbestos-related
      coverage litigation under insurance policies issued to PPG. The proposed
      settlement is subject to a number of significant contingencies, including,
      among others, the negotiation of a definitive settlement agreement among
      all the parties and final court approval, which if achieved, is expected
      to take up to a year or more. Under the proposed settlement, the insurers
      would have the option of making a single payment in 2004 or up to 20
      annual payments ending in 2023.

      The Company's contribution to the proposed settlement is currently valued
      at approximately $240 million (after tax and discounting) and would be
      covered by reserves and additional charges that would be taken if the
      settlement contingencies are met. The Company expects to recover all or a
      substantial portion of any additional charges related to this proposed
      settlement under its existing agreement with Citigroup with respect to
      asbestos claims and related litigation.

      In the ordinary course of business, the Company is a defendant or
      codefendant in various litigation matters other than those related to
      asbestos. Although there can be no assurances, as of June 30, 2002 in the
      opinion of the Company's management, based on information currently
      available, the ultimate resolution of these other legal proceedings would
      not be likely to have a material adverse effect on the results of the
      Company's operations, financial condition or liquidity.

9.    Commercial Insurance Resources, Inc.

      On August 1, 2002, Commercial Insurance Resources, Inc. (CIRI), an
      indirect subsidiary of the Company and the holding company for the Gulf
      Insurance Group (Gulf), completed its previously announced agreement with
      a group of outside investors and senior employees of Gulf. Capital
      investments made by the investors and employees included $86 million of
      mandatory convertible preferred stock, $50 million of convertible notes
      and $3 million of common equity, representing a 24% ownership interest
      of CIRI, on a fully diluted basis. The dividend rate on the preferred
      stock is 6%. The interest rate on the notes is 6% payable on an
      interest-only basis. The notes mature on December 31, 2032. Trident II,
      L.P., Marsh & McLennan Capital Professionals Fund, L.P., Marsh & McLennan
      Employees' Securities Company, L.P. and Trident Gulf Holding, LLC
      (collectively Trident) invested $125 million, and a group of
      approximately 75 senior employees of Gulf invested $14 million. Fifty
      percent of the CIRI senior employees' investment was financed by CIRI.
      This financing is collateralized by the CIRI securities purchased and is
      forgivable if Trident achieves certain investment returns. The applicable
      agreements provide for registration rights and transfer rights and
      restrictions and other matters customarily addressed in agreements with
      minority investors. Gulf provides a diverse product and program portfolio
      of specialty lines, with particular emphasis on management and
      professional liability.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis of Travelers Property Casualty Corp. (TPC)
and subsidiaries (collectively, the Company) financial condition and results of
operations should be read in conjunction with the condensed consolidated
financial statements of the Company and related notes included elsewhere in this
Form 10-Q. These financial statements retroactively reflect TPC's corporate
reorganization for all periods presented. The accompanying Management's
Discussion and Analysis of Financial Condition and Results of Operations should
also be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 31,
2001 included in the Company's Registration Statement on Form S-1, which was
declared effective on March 21, 2002 (Registration No. 333-82388).

TPC CORPORATE REORGANIZATION

In connection with the offerings described below, TPC effected a corporate
reorganization, under which:

      -     TPC transferred substantially all of its assets to affiliates of
            Citigroup, other than the capital stock of Travelers Insurance Group
            Holdings Inc. (TIGHI);

      -     Citigroup assumed all of TPC's third-party liabilities, other than
            liabilities relating to TIGHI and TIGHI's active employees;

      -     TPC effected a recapitalization whereby the previously outstanding
            shares of its common stock (1,500 shares), all of which were owned
            by Citigroup, were changed into 269 million shares of class A common
            stock and 500 million shares of class B common stock;

      -     TPC amended and restated its certificate of incorporation and
            bylaws.

As a result of these transactions, TIGHI and its insurance subsidiaries became
TPC's principal asset.

INITIAL PUBLIC OFFERING AND CONCURRENT CONVERTIBLE JUNIOR SUBORDINATED NOTES
OFFERING

In March 2002, TPC issued 231 million shares of its class A common stock in an
initial public offering (IPO), representing approximately 23% of TPC's common
equity. After the IPO, Citigroup beneficially owned all of the 500 million
shares of TPC's outstanding class B common stock, each share of which is
entitled to seven votes, and 269 million shares of TPC's class A common stock,
each of which is entitled to one vote, representing 94% of the combined voting
power of all classes of TPC's voting securities and 77% of the equity interest
in TPC. Concurrent with the IPO, TPC issued $893 million aggregate principal
amount of 4.5% convertible junior subordinated notes which mature on April 15,
2032. The IPO and the offering of the convertible notes are collectively
referred to as the offerings. During the first quarter of 2002, TPC paid three
dividends of $1.0 billion, $3.7 billion and $395 million, aggregating $5.1
billion, which were each in the form of notes payable. The proceeds of the
offerings were used to prepay the $395 million note and substantially prepay the
$3.7 billion note.

Citigroup has announced that, on or about August 20, 2002, it will make a
tax-free distribution to Citigroup's stockholders of a portion of Citigroup's
ownership interest in TPC, which, together with the shares issued in the IPO,
will represent more than 90% of TPC's common equity and more than 90% of the
combined voting power of TPC's then outstanding voting securities. Immediately
following the distribution, Citigroup will remain a holder of slightly less than
10% of TPC's common equity and slightly less than 10% of the combined voting
power of TPC's then outstanding voting securities. Citigroup estimates that for
each 100 shares of Citigroup common stock approximately 4.32 shares of class A
common stock and 8.89 shares of class B common stock will be distributed.
Citigroup has received a private letter ruling from the Internal Revenue Service
that the distribution will be tax-free to Citigroup, its stockholders and TPC.
As part of the ruling process, Citigroup agreed to vote the shares it continues
to hold following the distribution pro rata with the shares held by the public
and to divest the remaining shares it holds within five years following the
distribution.


                                       19
<PAGE>
OTHER TRANSACTIONS

The following transactions were completed in conjunction with the corporate
reorganization and offerings:

In February 2002, the Company paid a dividend of $1.0 billion to Citigroup in
the form of a non-interest bearing note payable on December 31, 2002. This note
will begin to accrue interest from December 31, 2002 on any outstanding balance
at the floating rate of the base rate of Citibank, N.A., New York City plus
2.0%. The Company expects to repay this note from current year earnings, to the
extent available.

In February 2002, the Company also paid a dividend of $3.7 billion to Citigroup
in the form of a note payable in two installments. This note was substantially
prepaid following the offerings. The balance of $150 million was due on May 9,
2004. This note would have begun to bear interest from May 9, 2002 at a rate of
7.25% per annum. This note was prepaid on May 8, 2002.

In March 2002, the Company paid a dividend of $395 million to Citigroup in the
form of a note which would have begun to bear interest after May 9, 2002 at a
rate of 6.0% per annum. This note was prepaid following the offerings.

In conjunction with its purchase of TIGHI's outstanding shares in April 2000,
TPC entered into a note agreement with Citigroup. On February 7, 2002, this note
agreement was replaced by a new note agreement. Under the terms of the new note
agreement, interest accrued on the aggregate principal amount outstanding at the
commercial paper rate (the then current short-term rate) plus 10 basis points
per annum. Interest was compounded monthly. This note was prepaid following the
offerings.

During March 2002, the Company entered into an agreement with Citigroup which
provides that in any year that the Company records additional asbestos-related
income statement charges in excess of $150 million, net of any reinsurance,
Citigroup will pay to the Company the amount of any such excess up to a
cumulative aggregate of $800 million, reduced by the tax effect of the highest
applicable federal income tax rate.

On February 28, 2002, the Company sold CitiInsurance to other Citigroup
affiliated companies for $403 million, its net book value. The Company has
applied $138 million of the proceeds from this sale to repay intercompany
indebtedness to Citigroup. In addition, the Company has purchased from Citigroup
affiliated companies the premises located at One Tower Square, Hartford,
Connecticut and other properties for $68 million. Additionally, certain
liabilities relating to employee benefit plans and lease obligations were
assigned and assumed by Citigroup affiliated companies. In connection with these
assignments, the Company transferred $172 million and $88 million, respectively,
to Citigroup affiliated companies.

The Company provides and purchases services to and from affiliates, including
facilities management, banking and financial functions, benefit coverages, data
processing services, and a short-term investment pool. Charges for these shared
services are allocated at cost. In connection with the announced tax-free
distribution by Citigroup, the Company is negotiating with Citigroup the terms
of a transition services agreement for the provision of these services, a
tradename and trademark agreement related to the use of trademarks, logos and
tradenames and is negotiating an amendment to the March 26, 2002 Intercompany
Agreement with Citigroup. During the first quarter of 2002, Citigroup provided
investment advisory services on an allocated cost basis, consistent with prior
years. The Company has entered into an investment management agreement dated
August 6, 2002, which has been applied retroactive to April 1, 2002, with an
affiliate of Citigroup whereby the affiliate of Citigroup will provide
investment advisory services to the Company with respect to its entire
investment portfolio for a period of two years and at fees mutually agreed
upon, including a component based on performance. The Company anticipates that
these fees will be higher than prior period allocated costs. Either party may
terminate the agreement effective on or after March 31, 2003 upon 90 days prior
notice. The Company and Citigroup have also agreed upon the allocation or
transfer of certain liabilities and assets, and rights and obligations in
furtherance of the separation of operations and ownership contemplated as a
result of the distribution. The net effect of these allocations and transfers,
in the opinion of management, will not be significant to the Company's results
of operations or financial condition.


                                       20
<PAGE>
CONSOLIDATED OVERVIEW

The Company provides a wide range of commercial and personal property and
casualty insurance products and services to businesses, government units,
associations and individuals, primarily in the United States.

On August 1, 2002, Commercial Insurance Resources, Inc. (CIRI), an indirect
subsidiary of the Company and the holding company for the Gulf Insurance Group
(Gulf), completed its previously announced agreement with a group of outside
investors and senior employees of Gulf. Capital investments made by the
investors and employees included $86 million of mandatory convertible preferred
stock, $50 million of convertible notes and $3 million of common equity,
representing a 24% ownership interest of CIRI, on a fully diluted basis. The
dividend rate on the preferred stock is 6%. The interest rate on the notes is
6% payable on an interest-only basis. The notes mature on December 31, 2032.
Trident II, L.P., Marsh & McLennan Capital Professionals Fund, L.P., Marsh &
McLennan Employees' Securities Company, L.P. and Trident Gulf Holding, LLC
(collectively Trident) invested $125 million, and a group of approximately 75
senior employees' of Gulf invested $14 million. Fifty percent of the CIRI
senior employees investment was financed by CIRI. This financing is
collateralized by the CIRI securities purchased and is forgivable if Trident
achieves certain investment returns. The applicable agreements provide for
registration rights and transfer rights and restrictions and other matters
customarily addressed in agreements with minority investors.

On October 1, 2001, the Company paid $329 million to Citigroup for The Northland
Company and its subsidiaries (Northland) and Associates Lloyds Insurance
Company. In addition, on October 3, 2001, the capital stock of Associates
Insurance Company (Associates), with a net book value of $356 million, was
contributed to the Company by Citigroup.

<TABLE>
<CAPTION>
CONSOLIDATED RESULTS OF OPERATIONS                            THREE MONTHS ENDED            SIX MONTHS ENDED
                                                                    JUNE 30,                    JUNE 30,
(in millions, except per share data)                            2002         2001           2002        2001
                                                             ---------     -------          ----       ------
<S>                                                          <C>           <C>              <C>        <C>
Revenues                                                     $   3,320     $ 2,983          6,553      $6,041
                                                             ---------     -------          -----      ------

Income before cumulative effect of changes
  in accounting principles                                   $     332     $   345            677      $  819
Cumulative effect of changes in accounting principles               --          (1)          (243)          3
                                                             ---------     -------          -----      ------
Net income                                                   $     332     $   344            434      $  822
                                                             ---------     -------          -----      ------

Basic and diluted earnings per share

Income before cumulative effect of changes
  in accounting principles                                   $    0.33     $  0.45           0.75      $ 1.06
Cumulative effect of changes in accounting principles               --          --          (0.27)       0.01
                                                             ---------     -------          -----      ------
Net income                                                   $    0.33     $  0.45           0.48      $ 1.07
                                                             ---------     -------          -----      ------
Weighted average number of common shares outstanding and
  common stock equivalents (basic and diluted)                 1,000.0       769.0          897.9       769.0
                                                             ---------     -------          -----      ------
</TABLE>


                                       21
<PAGE>
Net income was $332 million and $434 million in the 2002 second quarter and six
months, respectively, compared to $344 million and $822 million in the
comparable periods of 2001. Net income included $24 million and $4 million of
realized investment losses in the 2002 second quarter and six months,
respectively, compared to $33 million and $158 million of realized investment
gains in the comparable periods of 2001. Net income for the six months of 2002
included a charge of $243 million due to the adoption of Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" (FAS 142). The charge due to the adoption
of FAS 142 has been accounted for as a cumulative effect of a change in
accounting principle. Also included in net income in the 2002 second quarter and
six months was a restructuring charge of $1 million and $2 million,
respectively, representing accelerated depreciation relating to restructuring
activities that took place in the second quarter of 2001, and $2 million in the
2001 second quarter and six months. Included in the 2001 second quarter and six
months was a charge of $1 million related to the initial adoption of the FASB
Emerging Issues Task Force EITF 99-20, "Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets" (EITF 99-20). Also included in net income in the 2001 six
months was a benefit of $4 million related to the initial adoption of FASB
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activity," (FAS 133) in the 2001 first quarter. The net
benefit of $3 million in 2001 due to the adoption of these accounting changes
has been accounted for as a cumulative effect of changes in accounting
principles.

Operating income, which excludes realized investment gains and losses,
restructuring charges and the cumulative effect of the changes in accounting
principles, was $357 million and $683 million, or $0.36 per share and $0.76 per
share (basic and diluted), in the 2002 second quarter and six months,
respectively, compared to $314 million and $663 million, or $0.41 per share and
$0.86 per share (basic and diluted), in the comparable periods of 2001. The
increases in operating income for the 2002 second quarter and six months
compared to the 2001 comparable periods were driven by rate increases in excess
of loss cost trends, higher production levels, lower catastrophe losses, the
elimination of goodwill amortization and the Company's ongoing focus on managing
expenses. These factors were partly offset by unfavorable prior-year reserve
development in the 2002 quarter and six months versus favorable prior-year
reserve development in the prior year periods and by lower net investment
income. Included in consolidated operating income was the operating income of
the acquired Northland and Associates businesses of $1 million and $7 million in
the 2002 second quarter and six months, respectively.

Revenues of $3.320 billion and $6.553 billion in the 2002 second quarter and six
months, respectively, increased $337 million and $512 million from the
comparable periods of 2001. The increases were primarily attributable to the
inclusion of Northland and Associates in the 2002 second quarter and six months
and rate increases offset by net realized investment losses in 2002 compared to
net realized investment gains in 2001 and lower net investment income. Revenues
related to Northland and Associates in the 2002 second quarter and six months
were $270 million and $518 million, respectively, and were principally related
to Commercial Lines business. The increase in the 2002 second quarter revenue
reflects a $465 million increase in earned premiums, $36 million of realized
investment losses in the second quarter of 2002 compared to $50 million of
realized investment gains in the second quarter of 2001 and a $53 million
decrease in net investment income. The increase in the 2002 six months revenue
reflects an $818 million increase in earned premiums, $7 million of realized
investment losses in the 2002 six month period compared to $242 million of
realized investment gains in the 2001 six month period and a $94 million
decrease in net investment income. Realized investment losses include $127
million and $189 million of impairments in the 2002 second quarter and six
months, respectively, compared to $3 million and $27 million in the comparable
periods of 2001. Included in the 2002 second quarter and six months impairments
was a $68 million write down of the fair value of the Company's investments in
WorldCom bonds, from $83 million to $15 million.


                                       22
<PAGE>
Earned premiums increased $465 million and $818 million to $2.756 billion and
$5.341 billion in the 2002 second quarter and six months, respectively, from
$2.291 billion and $4.523 billion in the comparable periods of 2001. The
increase in earned premiums in the 2002 second quarter and six months was due to
the inclusion of Northland and Associates in the second quarter and six months
of 2002 and rate increases on renewal business in both Commercial Lines and
Personal Lines. Earned premiums related to Northland and Associates in the 2002
second quarter and six months were $245 million and $463 million, respectively,
and were principally related to Commercial Lines business.

Net investment income was $465 million and $953 million in the 2002 second
quarter and six months, respectively, a decrease of $53 million and $94 million
from the comparable periods of 2001. The declines resulted from a reduction in
after-tax investment yields to 4.3% and 4.4% in the 2002 second quarter and six
months, respectively, from 5.1% and 5.2% in the 2001 comparable periods. The
decrease in after-tax yields reflected the impact of realized investment gains
taken in 2001 and declining interest rates. The impact of lower yields was
partially offset by the rise in average invested assets due to the Northland and
Associates acquisitions and increased cash flow from operations.

Fee income was $109 million and $212 million in the 2002 second quarter and six
months, respectively, a $25 million and $50 million increase from the comparable
periods of 2001. National Accounts within Commercial Lines is the primary source
of fee income due to its service fee business. The increases in fee income were
primarily due to the favorable rate environment and the repopulation of the
involuntary pools. Written fees were $125 million and $268 million in the 2002
second quarter and six months, respectively, compared to $84 million and $196
million for the comparable periods in 2001. The increases were primarily due to
increased pricing for loss prevention and claims administrative services as well
as more business turning to state residual market pools for workers'
compensation. Claim volume under administration increased to $595 million and
$1.467 billion for the 2002 second quarter and six months, respectively,
compared to $479 million and $1.245 billion for the comparable periods in 2001.

Claims and expenses were $2.885 billion and $5.663 billion in the 2002 second
quarter and six months, respectively, compared to $2.513 billion and $4.903
billion in the comparable periods of 2001. The 2002 increases were primarily due
to the inclusion in the 2002 second quarter and six months of the results of
Northland and Associates which added $270 million and $508 million,
respectively, to claims and expenses. The increases also reflected the result of
increased loss cost trends, unfavorable prior-year reserve development in the
2002 second quarter and six months versus favorable prior-year reserve
development in the comparable periods of 2001, partially offset by lower
interest expense, the elimination of goodwill amortization, underwriting
discipline and expense management.

The Company's effective federal tax rate was 24% in both the 2002 second quarter
and six months, compared to 27% and 28% in the comparable periods of 2001. These
rates differed from the statutory tax rate primarily due to non-taxable
investment income. The decrease in the effective tax rate from the 2001 second
quarter and six months was primarily due to higher realized investment gains,
which are fully taxable, in the 2001 second quarter and six months compared to
the comparable periods of 2002.


                                       23
<PAGE>
The statutory and GAAP combined ratios were as follows:

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED       SIX MONTHS ENDED
                                                         JUNE 30,                 JUNE 30,
                                                     2002        2001        2002        2001
                                                     ----        ----        ----        ----
<S>                                                  <C>        <C>          <C>        <C>
STATUTORY:
  Loss and Loss Adjustment Expense (LAE) ratio       74.5%       75.2%       74.7%       73.0%
  Underwriting expense ratio                         24.6        26.4        25.5        27.4
  Combined ratio before policyholder dividends       99.1       101.6       100.2       100.4
  Combined ratio                                     99.0       101.7       100.3       100.7

GAAP:
  Loss and LAE ratio                                 74.1%       75.0%       74.3%       72.8%
  Underwriting expense ratio                         22.5        26.8        24.1        27.1
  Combined ratio before policyholder dividends       96.6       101.8        98.4        99.9
  Combined ratio                                     96.5       101.9        98.5       100.2
</TABLE>

GAAP combined ratios differ from statutory combined ratios primarily due to the
deferral and amortization of certain expenses for GAAP reporting purposes only.

The decreases in the 2002 second quarter and six month statutory and GAAP
combined ratios before policyholder dividends compared to the 2001 second
quarter and six month periods were primarily due to the benefit of rate
increases in excess of loss cost trends, lower catastrophe losses, underwriting
discipline and expense management, partially offset by increased loss cost
trends and unfavorable prior-year reserve development in the 2002 second quarter
and six months compared to favorable prior-year reserve development in the 2001
second quarter and six months. The impact of prior-year reserve development was
an increase in the 2002 second quarter and six month statutory and GAAP combined
ratios of 3.4% and 3.7%, respectively, compared to a decrease of 1.2% and 1.0%
in the comparable periods of 2001.

SEGMENT RESULTS

COMMERCIAL LINES

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED        SIX MONTHS ENDED
                                                               JUNE 30,                 JUNE 30,
(in millions)                                              2002        2001         2002        2001
                                                          ------     -------      -------      ------
<S>                                                       <C>        <C>          <C>          <C>
Revenues                                                  $2,182     $ 1,884      $ 4,270      $3,853
                                                          ------     -------      -------      ------

Income before cumulative effect of changes
  in accounting principles                                $  317     $   334      $   621      $  751
Cumulative effect of changes in accounting principles         --          (1)        (243)          2
                                                          ------     -------      -------      ------
Net income                                                $  317     $   333      $   378      $  753
                                                          ------     -------      -------      ------
</TABLE>


                                       24
<PAGE>
Net income was $317 million and $378 million in the 2002 second quarter and six
months, respectively, compared to $333 million and $753 million in the
comparable periods of 2001. Commercial Lines net income included $6 million and
$33 million of realized investment gains in the 2002 second quarter and six
months, respectively, compared to $32 million and $148 million in the comparable
periods of 2001. Net income for the 2002 six months included a charge of $243
million related to the initial adoption of FAS 142, which has been accounted for
as a cumulative effect of a change in accounting principle. Included in net
income in the 2001 second quarter and six months was a charge of $1 million
related to the initial adoption of EITF 99-20. Also included in net income in
the six months of 2001 was a benefit of $3 million in the first quarter of 2001
related to the initial adoption of FAS 133. Both of these items have been
accounted for as a cumulative effect of changes in accounting principles.

Commercial Lines operating income, which excludes realized investment gains and
losses and the cumulative effect of the changes in accounting principles
described above, was $311 million and $588 million in the 2002 second quarter
and six months, respectively, compared to $302 million and $603 million in the
comparable periods of 2001. The increase in operating income for the 2002 second
quarter compared to the 2001 comparable period was driven by rate increases in
excess of loss cost trends, higher production levels, no catastrophe losses in
the 2002 second quarter compared to $13 million in the 2001 second quarter, the
elimination of goodwill amortization and the Company's ongoing focus on managing
expenses. These factors were partly offset by unfavorable prior-year reserve
development in the current quarter versus favorable prior-year reserve
development in the prior year quarter and by lower net investment income. The
decrease in operating income for the six month period reflects the effects of
unfavorable prior-year reserve development in the current six month period
versus favorable prior-year reserve development in the comparable prior year
period and lower net investment, largely offset by the benefit of rate increases
in excess of loss cost trends, no catastrophe losses in the 2002 six month
period compared to $21 million in the 2001 six month period, the elimination of
goodwill amortization and the Company's ongoing focus on managing expenses.

Revenues of $2.182 billion and $4.270 billion in the 2002 second quarter and six
months, respectively, increased $298 million and $417 million from $1.884
billion and $3.853 billion in the comparable periods of 2001. These increases
are primarily attributable to the inclusion of Northland and Associates in the
2002 second quarter and six months and rate increases. Revenues related to
Northland and Associates in the 2002 second quarter and six months were $238
million and $458 million, respectively. The increases in revenues reflected
higher earned premiums and fee income in the 2002 second quarter and six months,
partially offset by lower realized investment gains and net investment income.

Earned premiums increased $376 million and $642 million to $1.688 billion and
$3.243 billion in the 2002 second quarter and six months, respectively, from
$1.312 billion and $2.601 billion in the comparable periods of 2001. The
increases in earned premiums in the 2002 second quarter and six months were
primarily due to the inclusion of Northland and Associates in the 2002 second
quarter and six months and rate increases. Earned premiums related to Northland
and Associates in the 2002 second quarter and six months were $215 million and
$409 million, respectively.

Net investment income was $369 million and $752 million in the 2002 second
quarter and six months, respectively, a decrease of $47 million and $81 million
from the comparable periods of 2001. The declines resulted from a reduction in
after-tax investment yields, attributed to the impact of realized investment
gains taken in 2001 and declining interest rates, partially offset by an
increase in average invested assets due to the acquisitions of Northland and
Associates and increased cash flow from operations.


                                       25
<PAGE>
Fee income was $109 million and $212 million in the 2002 second quarter and six
months, respectively, a $25 million and $50 million increase from the comparable
periods of 2001. National Accounts is the primary source of fee income due to
its service fee business. The increases in fee income were primarily due to the
favorable rate environment and the repopulation of the involuntary pools.
Written fees were $125 million and $268 million in the 2002 second quarter and
six months, respectively, compared to $84 million and $196 million for the
comparable periods in 2001. The increases were primarily due to increased
pricing for loss prevention and claims administrative services as well as more
business turning to state residual market pools for workers' compensation. Claim
volume under administration increased to $595 million and $1.467 billion for the
2002 second quarter and six months, respectively, compared to $479 million and
$1.245 billion for the comparable periods in 2001.

Net written premiums by market were as follows:

<TABLE>
<CAPTION>
                              THREE MONTHS ENDED      SIX MONTHS ENDED
                                    JUNE 30,             JUNE 30,
(in millions)                   2002       2001       2002       2001
                               ------     ------     ------     ------
<S>                            <C>        <C>        <C>        <C>
National Accounts              $  197     $   78     $  294     $  204
Commercial Accounts               912        527      1,771      1,074
Select Accounts                   473        439        928        869
Bond                              160        143        291        310
Gulf                              180        189        325        364
                               ------     ------     ------     ------
Total net written premiums     $1,922     $1,376     $3,609     $2,821
                               ======     ======     ======     ======
</TABLE>

Net written premiums increased $546 million to $1.922 billion and increased $788
million to $3.609 billion for the 2002 second quarter and six months,
respectively, primarily due to the inclusion of Northland and Associates in the
2002 second quarter and six months and rate increases. The acquisition of
Northland and Associates contributed $300 million and $483 million, respectively
to these increases, including approximately $115 million relating to the
termination of certain reinsurance contracts in the 2002 second quarter. The
Commercial Lines business of Northland and Associates is included with
Commercial Accounts.

National Accounts works with national and regional brokers providing insurance
coverages and services, primarily workers' compensation, mainly to large
corporations. National Accounts also includes the residual market business,
which sells claims and policy management services to workers' compensation and
automobile assigned risk plans and to self-insurance pools throughout the United
States. National Accounts net written premiums were $197 million and $294
million in the 2002 second quarter and six months, respectively, compared to $78
million and $204 million in the comparable periods of 2001. The increases in
National Accounts net written premiums were due to rate increases, higher new
business levels and the renewal of certain assumed reinsurance contracts
previously written by Gulf. Net written premiums also increased as more business
turned to state residual market pools for workers' compensation. The business
retention ratio for the 2002 second quarter was significantly higher than the
2001 comparable period and for the 2002 six months was moderately higher than
the 2001 comparable period. For Commercial Lines, retention represents the
estimated percentage of premium available for renewal which renewed in the
current period.


                                       26
<PAGE>
Commercial Accounts serves primarily mid-sized businesses for casualty products
and both large and mid-sized businesses for property products through a network
of independent agents and brokers. Commercial Accounts net written premiums
increased 73% to $912 million and 65% to $1.771 billion in the 2002 second
quarter and six months, respectively. These increases were significantly
impacted by the inclusion in the 2002 second quarter and six months of the
results of Northland and Associates. Northland and Associates net written
premiums include an increase of approximately $115 million in the second quarter
2002 related to the termination of certain reinsurance contracts. Excluding the
impact of Northland and Associates, net written premiums increased 16% or $85
million and 20% or $214 million for the 2002 second quarter and six months,
respectively, primarily driven by renewal price changes averaging 23% for the
2002 second quarter and six months and strong growth in new business. Renewal
price change represents the estimated average change in premium on policies that
renew, including rate and exposure changes, versus the average premium on those
same policies for their prior term. New business activity, primarily premiums,
in Commercial Accounts for the 2002 second quarter and six months was $171
million and $358 million compared to $106 million and $209 million in the
comparable periods of 2001. The business retention ratio for the 2002 second
quarter and six months was 74%, up from 70% for the comparable periods of 2001.
This renewal price change, new business and retention information excludes
Northland and Associates for the purpose of comparability.

Select Accounts serves small businesses through a network of independent agents.
Select Accounts net written premiums increased 8% to $473 million and 7% to $928
million in the 2002 second quarter and six months, respectively. The increases
in Select Accounts net written premiums primarily reflected renewal price
changes averaging 18% and 17% for the 2002 second quarter and six months,
respectively. New business premiums in Select Accounts for the 2002 second
quarter and six months was $71 million and $138 million compared to $71 million
and $147 million in the comparable periods of 2001. The business retention ratio
for the 2002 second quarter and six months, which ranged between 79% and 80%,
remained strong and fairly consistent with the comparable periods of 2001.

Bond provides a variety of fidelity and surety bonds and executive liability
coverages to clients of all sizes through independent agents and brokers. Bond
net written premiums of $160 million and $291 million in the 2002 second quarter
and six months, respectively, were $17 million higher and $19 million lower than
the comparable periods of 2001. The 2002 six months amount is lower by $18
million due to a change in the Bond Executive Liability excess of loss
reinsurance treaty that was effective January 1, 2002. In addition, the 2001 six
months amount is higher by $34 million due to the termination of the Master Bond
Liability reinsurance treaty effective January 1, 2001. Excluding these two
reinsurance adjustments, Bond net written premiums increased $33 million during
the 2002 six months compared to the comparable period of 2001. Higher prices in
professional liability and fidelity and surety helped to increase Bond's net
written premiums in the 2002 second quarter and six months, partially offset by
higher reinsurance costs.

Gulf markets products to national, mid-sized and small customers and distributes
them through both wholesale brokers and retail agents and brokers throughout the
United States. Gulf net written premiums were $180 million and $325 million in
the 2002 second quarter and six months, respectively, compared to $189 million
and $364 million in the comparable periods of 2001. Reductions in exposures in
certain programs, including assumed reinsurance, transportation and property,
offset increases in Gulf's core specialty lines, resulting in an overall
decrease in Gulf's net written premiums.

Commercial Lines claims and expenses of $1.761 billion and $3.446 billion in the
2002 second quarter and six months, respectively, increased $337 million and
$640 million from $1.424 billion and $2.806 billion in the comparable periods of
2001. The 2002 increases were primarily due to the inclusion in the 2002 second
quarter and six months of the results of Northland and Associates, which added
$236 million and $445 million, respectively, to claims and expenses. The
increases also reflected unfavorable prior-year reserve development in the 2002
second quarter and six months versus favorable prior-year reserve development in
the 2001 second quarter and six months and increased loss cost trends, partially
offset by the elimination of goodwill amortization, underwriting discipline and
expense management.


                                       27
<PAGE>
There were no catastrophe losses in the 2002 second quarter or six months.
Catastrophe losses, net of taxes and reinsurance, were $13 million and $21
million in the 2001 second quarter and six months. Catastrophe losses in 2001
were primarily due to the Seattle earthquake in the first quarter and Tropical
Storm Allison in the second quarter.

Statutory and GAAP combined ratios for Commercial Lines were as follows:

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED       SIX MONTHS ENDED
                                                         JUNE 30,                JUNE 30,
                                                     2002        2001        2002        2001
                                                     ----       -----        ----       -----
<S>                                                  <C>        <C>          <C>         <C>
STATUTORY:
  Loss and LAE ratio                                 73.2%       72.2%       73.6%       71.1%
  Underwriting expense ratio                         25.1        27.9        26.1        28.9
  Combined ratio before policyholder dividends       98.3       100.1        99.7       100.0
  Combined ratio                                     98.2       100.4        99.9       100.5

GAAP:
  Loss and LAE ratio                                 72.6%       71.7%       73.0%       70.7%
  Underwriting expense ratio                         22.2        28.7        23.9        28.1
  Combined ratio before policyholder dividends       94.8       100.4        96.9        98.8
  Combined ratio                                     94.7       100.7        97.1        99.3
</TABLE>

GAAP combined ratios for Commercial Lines differ from statutory combined ratios
primarily due to the deferral and amortization of certain expenses for GAAP
reporting purposes only.

The decreases in the 2002 second quarter and six month statutory and GAAP
combined ratios before policyholder dividends compared to the 2001 second
quarter and six month periods were primarily due to the benefit of rate
increases in excess of loss cost trends, lower catastrophe losses, underwriting
discipline and expense management, partially offset by increased loss cost
trends, and unfavorable prior-year reserve development in the 2002 second
quarter and six months versus favorable prior-year reserve development in the
2001 second quarter and six months. The impact of prior-year reserve development
was an increase in the 2002 second quarter and six month statutory and GAAP
combined ratios of 5.4% and 5.8%, respectively, compared to a decrease of 1.0%
and 0.9% in the comparable periods of 2001.

PERSONAL LINES

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED     SIX MONTHS ENDED
                                                            JUNE 30,              JUNE 30,
(in millions)                                            2002       2001       2002       2001
                                                        ------     ------     ------     ------
<S>                                                     <C>        <C>        <C>        <C>
Revenues                                                $1,138     $1,100     $2,281     $2,191
                                                        ------     ------     ------     ------

Income before cumulative effect of change
  in accounting principle                               $   39     $   48     $  102     $  154
Cumulative effect of change in accounting principle         --         --         --          1
                                                        ------     ------     ------     ------
Net income                                              $   39     $   48     $  102     $  155
                                                        ------     ------     ------     ------
</TABLE>


                                       28
<PAGE>
Net income was $39 million and $102 million in the 2002 second quarter and six
months, respectively, compared to $48 million and $155 million in the comparable
periods of 2001. Personal Lines net income included $30 million and $37 million
of realized investment losses in the 2002 second quarter and six months,
respectively, and no realized investment gains in the 2001 second quarter and
$10 million of realized investment gains in the 2001 six months. Also included
in net income in the 2002 second quarter and six months was a restructuring
charge of $1 million and $2 million, respectively, representing accelerated
depreciation relating to restructuring activities that took place in the second
quarter of 2001, and $2 million in the 2001 second quarter and six months.
Included in Personal Lines net income in the six months of 2001 was a benefit of
$1 million related to the initial adoption of FAS 133, which has been accounted
for as a cumulative effect of a change in an accounting principle.

Personal Lines operating income, which excludes realized investment gains and
losses, restructuring charges and the cumulative effect of the change in
accounting principle in the first quarter of 2001, was $70 million and $141
million in the 2002 second quarter and six months, respectively, compared to $50
million and $146 million in the comparable periods of 2001. The increase in
operating income for the 2002 second quarter compared to the 2001 comparable
period was principally due to lower catastrophe losses. Operating income also
benefited from rate increases that continue to exceed loss cost trends, the
elimination of goodwill amortization and the Company's ongoing focus on managing
expenses. These factors were partly offset by unfavorable prior-year reserve
development in the current quarter versus favorable prior-year reserve
development in the prior year quarter and by lower net investment income. The
decrease in operating income for the six month period reflects the effects of
increased loss cost trends, unfavorable prior-year reserve development in the
current six month period versus favorable prior-year reserve development in the
prior year six month period and lower net investment, substantially offset by
the benefit of rate increases, lower catastrophe losses, the elimination of
goodwill amortization and the Company's ongoing focus on managing expenses.

Revenues during the 2002 second quarter and six months of $1.138 billion and
$2.281 billion, respectively, increased $38 million and $90 million from the
comparable periods of 2001. The increases in revenues reflected growth in earned
premiums due to rate increases and the inclusion of Northland in the 2002 second
quarter and six months, partially offset by realized investment losses in the
2002 second quarter and six months compared to realized investment gains in the
comparable periods of 2001 and a decrease in net investment income.

Earned premiums increased $89 million and $176 million to $1.068 billion and
$2.098 billion in the 2002 second quarter and six months, respectively, from
$979 million and $1.922 billion in the comparable periods of 2001. The increase
in earned premiums in the 2002 second quarter and six months was primarily due
to rate increases and the inclusion of Northland in 2002, which added $30
million and $54 million, respectively.

Net investment income was $96 million and $200 million in the 2002 second
quarter and six months, respectively, a decrease of $7 million and $17 million
from the comparable periods of 2001. The declines resulted from a reduction in
after-tax investment yields, attributed to the impact of realized investment
gains taken in 2001 and declining interest rates, partially offset by an
increase in average invested assets due to the acquisition of Northland and
increased cash flow from operations.

Other income was $19 million and $40 million in the 2002 second quarter and six
months, respectively, a $1 million and $4 million increase from the comparable
periods of 2001. Premium installment charges are the primary source of Personal
Lines other income. The increase in other income was primarily due to the
inclusion of Northland in the 2002 second quarter and six months.


                                       29
<PAGE>
Net written premiums by product line:

<TABLE>
<CAPTION>
                                         THREE MONTHS ENDED     SIX MONTHS ENDED
                                              JUNE 30,              JUNE 30,
(in millions)                              2002       2001       2002       2001
                                         ------     ------     ------     ------
<S>                                      <C>        <C>        <C>        <C>
Personal automobile                      $  715     $  653     $1,402     $1,275
Homeowners and other                        459        402        810        723
                                         ------     ------     ------     ------
Total net written premiums               $1,174     $1,055     $2,212     $1,998
                                         ------     ------     ------     ------
</TABLE>

The increase in net written premiums of $119 million in the 2002 quarter and
$214 million in the six month period was principally a result of rate increases
in both the Automobile and Homeowners and Other lines of business. The Northland
acquisition contributed $27 million and $64 million to this rise in the 2002
quarter and six month period, respectively.

Automobile net written premiums increased 9% to $715 million and 10% to $1.402
billion in the 2002 second quarter and six month period, respectively. Excluding
the impact of Northland, Automobile net written premiums increased 6% to $693
million and 6% to $1.345 billion, respectively. Renewal price changes for
standard voluntary business were 9% and 8% for the 2002 second quarter and six
month period, respectively. Renewal price change represents the estimated
average change in premium on policies that renew, including rate and exposure
changes, versus the average premium on those same policies for their prior term.
Retention levels for standard voluntary business were consistent with prior
quarters and six month periods. Retention in Personal Lines represents the
estimated percentage of policies from the prior year renewed in the current
period.

Homeowners and Other net written premiums increased 14% to $459 million and 12%
to $810 million in the 2002 second quarter and six month period, respectively.
Excluding the impact of Northland, Homeowners and Other net written premiums
increased 13% to $454 million and 11% to $803 million, respectively, primarily
driven by renewal price changes of 16% and 14% for the 2002 second quarter and
six month period, respectively. Retention levels were also consistent with prior
quarters and six month periods.

Production through the Company's independent agents in Personal Lines, including
the impact of Northland, which represents over 80% of Personal Lines total net
written premiums, was up 14% to $961 million in the 2002 second quarter and up
13% to $1.812 billion for the 2002 six month period. Net written premiums
through channels other than independent agents was up only 2% to $213 million
for the 2002 second quarter and 1% to $400 million for the six month period as
the favorable impact of renewal price changes was predominately offset by a
reduction in policies in force due to underwriting actions taken on marginal
business.

Personal Lines claims and expenses were $1.087 billion and $2.145 billion in the
2002 second quarter and six months, respectively, compared to $1.033 billion and
$1.969 billion in the comparable periods of 2001. The increases reflected
increased loss cost trends, unfavorable prior-year reserve development in the
2002 second quarter and six months versus favorable prior-year reserve
development in the 2001 second quarter and six months, and the inclusion of
Northland in the 2002 second quarter and six months, partially offset by lower
catastrophe losses and the benefit of the elimination of goodwill amortization.

Catastrophe losses, net of tax and reinsurance, were $15 million and $25 million
in the 2002 second quarter and six months, respectively, compared to $42 million
in both of the comparable periods of 2001. Catastrophe losses in 2002 were
primarily due to winter storms in the Midwest and New York in the first quarter
and a wind and hailstorm in Maryland and Virginia in the second quarter.
Catastrophe losses in 2001 were primarily due to Tropical Storm Allison and wind
and hailstorms in the Midwest and Texas in the second quarter.


                                       30
<PAGE>
Statutory and GAAP combined ratios for Personal Lines were as follows:

<TABLE>
<CAPTION>
                                  THREE MONTHS ENDED       SIX MONTHS ENDED
                                       JUNE 30,                JUNE 30,
                                   2002        2001        2002        2001
                                  -----       -----       -----       -----
<S>                               <C>         <C>         <C>         <C>
STATUTORY:
  Loss and LAE ratio               76.6%       79.4%       76.4%       75.6%
  Underwriting expense ratio       23.8        24.5        24.4        25.3
  Combined ratio                  100.4       103.9       100.8       100.9

GAAP:
  Loss and LAE ratio               76.6%       79.4%       76.4%       75.6%
  Underwriting expense ratio       22.9        24.3        24.5        25.8
  Combined ratio                   99.5       103.7       100.9       101.4
</TABLE>

GAAP combined ratios for Personal Lines differ from statutory combined ratios
primarily due to the deferral and amortization of certain expenses for GAAP
reporting purposes only.

The decreases in the 2002 second quarter and six month statutory and GAAP
combined ratios compared to the 2001 second quarter and six month periods were
primarily due to the benefit of rate increases, lower catastrophe losses and
expense management, largely offset by increased loss cost trends and unfavorable
prior-year reserve development in the 2002 second quarter and six months versus
favorable prior-year reserve development in the 2001 second quarter and six
months. The impact of prior-year reserve development was an increase in both the
2002 second quarter and six month statutory and GAAP combined ratios of 0.4%,
compared to a decrease of 1.4% and 1.0% in the comparable periods of 2001.

INTEREST EXPENSE AND OTHER

<TABLE>
<CAPTION>
                                 THREE MONTHS ENDED           SIX MONTHS ENDED
                                      JUNE 30,                    JUNE 30,
(in millions)                    2002          2001          2002          2001
                                -----          ----          ----          ----
<S>                             <C>            <C>           <C>           <C>
Revenues                        $  --          $ (1)         $  2          $ (3)
Net loss                        $ (24)         $(37)         $(46)         $(86)
                                -----          ----          ----          ----
</TABLE>

The primary component of net loss was after-tax interest expense of $26 million
and $49 million in the 2002 second quarter and six months, respectively, and $34
million and $77 million in the 2001 comparable periods. The decrease in interest
expense in the 2002 second quarter and six months is primarily due to lower
average interest bearing debt levels. The decrease in interest bearing debt
levels was primarily due to repayments of debt obligations to Citigroup.


                                       31
<PAGE>
ENVIRONMENTAL CLAIMS

The Company's reserves for environmental claims are not established on a
claim-by-claim basis. The Company carries an aggregate bulk reserve for all of
the Company's environmental claims that are in dispute, until the dispute is
resolved. This bulk reserve is established and adjusted based upon the aggregate
volume of in-process environmental claims and the Company's experience in
resolving those claims. At June 30, 2002, approximately 76% of the net
environmental reserve (approximately $265 million), is carried in a bulk reserve
and includes unresolved and incurred but not reported environmental claims for
which the Company has not received any specific claims as well as for the
anticipated cost of coverage litigation disputes relating to these claims. The
balance, approximately 24% of the net environmental reserve (approximately $86
million) consists of case reserves for resolved claims.

For further discussion of environmental claims and the risks involved, see
"Risks Factors - Our business could be harmed because our potential exposure for
environmental claims is very difficult to predict" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Environmental
Claims" in the Company's Registration Statement on Form S-1 (Registration No.
333-82388) which was declared effective on March 21, 2002.

The following table displays activity for environmental losses and loss expenses
and reserves:

ENVIRONMENTAL LOSSES

<TABLE>
<CAPTION>
                                                          AS OF AND FOR THE
                                                           SIX MONTHS ENDED
                                                              JUNE 30,
(in millions)                                            2002            2001
                                                        -----           -----
<S>                                                     <C>             <C>
Beginning reserves:
  Direct                                                $ 479           $ 669
  Ceded                                                   (83)           (111)
                                                        -----           -----
  Net                                                     396             558

Incurred losses and loss expenses:
  Direct                                                   28              29
  Ceded                                                    --              (6)

Losses paid:
  Direct                                                   89             162
  Ceded                                                   (16)            (23)
                                                        -----           -----

Ending reserves:
  Direct                                                  418             536
  Ceded                                                   (67)            (94)
                                                        -----           -----
     Net                                                $ 351           $ 442
                                                        -----           -----
</TABLE>


                                       32
<PAGE>
ASBESTOS CLAIMS

The Company believes that the property and casualty insurance industry has
suffered from judicial interpretations that have attempted to maximize insurance
availability for asbestos claims, from both a coverage and liability standpoint,
far beyond the intent of the contracting parties. These policies generally were
issued prior to 1980. The Company continues to receive asbestos claims alleging
insureds' liability from claimants' asbestos-related injuries. Since the
beginning of 2000, the Company has experienced an increase over prior years in
the number of asbestos claims being tendered to the Company, including by some
individuals who do not appear to be impaired by asbestos exposure, and the
Company expects this trend to continue. Factors leading to these increases
include more intensive advertising by lawyers seeking asbestos claimants, the
increasing focus by plaintiffs on new and previously peripheral defendants and
an increase in the number of entities seeking bankruptcy protection as a result
of asbestos-related liabilities. In addition to contributing to the increase in
claims, the bankruptcy proceedings may increase the volatility of results by
initially delaying the reporting of claims and by significantly accelerating and
increasing loss payments by insurers, including the Company. Particularly during
the last few months of 2001 and continuing into 2002, these trends have both
accelerated and become more visible. Accordingly, there is a high degree of
uncertainty with respect to future exposure from asbestos claims.

Increasingly, policyholders have been asserting that their claims for
asbestos-related insurance are not subject to aggregate limits on coverage and
that each individual bodily injury claim should be treated as a separate
occurrence under the policy. The Company expects this trend to continue.
Although it is difficult to predict whether these policyholders will be
successful on both issues, to the extent both issues are resolved in their
favor, the Company's coverage obligations under the policies at issue would be
materially increased and bounded only by the applicable per occurrence limits
and the number of asbestos bodily injury claims against the policyholders.
Accordingly, it is difficult to predict the ultimate size of the claims for
coverage not subject to aggregate limits. In addition, many coverage disputes
with policyholders are only resolved through aggressive settlement efforts.
Because many policyholders make exaggerated demands, it is difficult to predict
the outcome of settlement negotiations. Settlements involving bankrupt insureds
may include extensive releases which could result in settlements for larger
amounts than originally anticipated.

In addition, proceedings have recently been launched directly against insurers,
including the Company, challenging insurers' conduct in respect of asbestos
claims, including in some cases with respect to previous settlements. Some
plaintiffs have also joined the Company as defendants in asbestos personal
injury cases that are close to trial. The Company anticipates the filing of
other direct actions against insurers, including the Company, in the future.
Particularly in light of jurisdictional issues, it is difficult to predict the
outcome of these proceedings, including whether the plaintiffs will be able to
sustain these actions against insurers based on novel legal theories of
liability.

Because each insured presents different liability and coverage issues, the
Company evaluates the exposure presented by each insured on an
insured-by-insured basis. In the course of this evaluation, the Company
considers: available insurance coverage, including the role any umbrella or
excess insurance the Company has issued to the insured; limits and deductibles;
an analysis of each insured's potential liability; the jurisdictions involved;
past and anticipated future claim activity and loss development on pending
claims; past settlement values of similar claims; allocated claim adjustment
expense; potential role of other insurance; the role, if any, of non-asbestos
claims or potential non-asbestos claims in any resolution process; and
applicable coverage defenses or determinations, if any, including the
determination as to whether or not an asbestos claim is a products/completed
operation claim subject to an aggregate limit and the available coverage, if
any, for that claim. Once the gross ultimate exposure for indemnity and
allocated claim adjustment expense is determined for each insured by each policy
year, the Company calculates a ceded reinsurance projection based on any
applicable facultative and treaty reinsurance, as well as past ceded experience.
Adjustments to the ceded projections also occur due to actual ceded claim
experience and reinsurance collections. The Company's evaluations have not
resulted in any meaningful data from which an average asbestos defense or
indemnity payment may be determined.


                                       33
<PAGE>
The Company also compares its historical direct and net loss and expense paid
experience, year-by-year, to assess any emerging trends, fluctuations or
characteristics suggested by the aggregate paid activity. The comparison
includes a review of the result derived from the division of the ending direct
and net reserves by last year's direct and net paid activity, also known as the
survival ratio. Losses paid, both direct and ceded, have increased in the first
six months of 2002 compared to the first six months of 2001 primarily as a
result of two factors. In the second quarter of 2001 there was a substantial
one time recovery related to a prior year claim payment. In addition, there has
been an acceleration in recent quarters in the rate of payments arising from
prior settlements of coverage disputes entered into between the Company and
certain of its policyholders. As part of the Company's ongoing review and
analysis of its reserve levels, the Company will continue to closely monitor
these trends and adjust its reserve in the future if appropriate.

At June 30, 2002, approximately 75% (approximately $562 million) of the net
asbestos reserves represents incurred but not reported losses for which the
Company has not received any specific claims, comprising losses for new claims
that may be reported in the future and adverse development on claims that have
already been reported. The balance, approximately 25% of the net asbestos
reserve (approximately $185 million) is for pending asbestos claims, including
existing settlement agreements with insureds. As in the past, asbestos claims,
when submitted, rarely indicate the monetary amount being sought by the claimant
from the insured, and the Company does not keep track of the monetary amount
being sought in those few claims that indicated a monetary amount. Based upon
the Company's experience with asbestos claims, the duration period of an
asbestos claim from the date of submission to resolution is approximately two
years.

For further discussion of asbestos-related claims and litigation and the risks
involved, see "Risk Factors - Our business could be harmed because our potential
exposure for asbestos claims and related litigation is very difficult to
predict" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Asbestos Claims and Litigation" in the Company's
Registration Statement on Form S-1 (Registration No 333-82388), which was
declared effective on March 21, 2002.

In general, the Company posts case reserves for pending asbestos claims within
approximately thirty (30) business days of receipt of these claims. The
following table displays activity for asbestos losses and loss expenses and
reserves:

<TABLE>
<CAPTION>
ASBESTOS LOSSES                                           AS OF AND FOR THE
                                                           SIX MONTHS ENDED
                                                               JUNE 30,
(in millions)                                            2002             2001
                                                       -------          -------
<S>                                                    <C>              <C>
Beginning reserves:
  Direct                                               $ 1,046          $ 1,005
  Ceded                                                   (226)            (199)
                                                       -------          -------
  Net                                                      820              806

Incurred losses and loss expenses:
  Direct                                                   101              112
  Ceded                                                     --              (36)

Losses paid:
  Direct                                                   200               95
  Ceded                                                    (26)             (27)
                                                       -------          -------

Ending reserves:
  Direct                                                   947            1,022
  Ceded                                                   (200)            (208)
                                                       -------          -------
    Net                                                $   747          $   814
                                                       -------          -------
</TABLE>


                                       34
<PAGE>
In May 2002, the Company agreed with approximately three dozen insurers and PPG
Industries, Inc. (PPG) on key terms to settle asbestos-related coverage
litigation under insurance policies issued to PPG. The proposed settlement is
subject to a number of significant contingencies, including, among others, the
negotiation of a definitive settlement agreement among all the parties and final
court approval, which if achieved, is expected to take up to a year or more.
Under the proposed settlement, the insurers would have the option of making a
single payment in 2004 or up to 20 annual payments ending in 2023.

The Company's contribution to the proposed settlement is currently valued at
approximately $240 million (after tax and discounting) and would be covered by
reserves and additional charges that would be taken if the settlement
contingencies are met. The Company expects to recover all or a substantial
portion of any additional charges related to this proposed settlement under its
existing agreement with Citigroup with respect to asbestos claims and related
litigation. See "- Uncertainty Regarding Adequacy of Environmental and Asbestos
Reserves."

UNCERTAINTY REGARDING ADEQUACY OF ENVIRONMENTAL AND ASBESTOS RESERVES

Due to the factors described above, it is not presently possible to quantify the
ultimate exposure or range of exposure represented by environmental claims and
asbestos claims and related litigation. Accordingly, it is difficult to estimate
the reserves for environmental claims and asbestos claims and related
litigation. Conventional actuarial techniques are not used to estimate these
reserves.

As a result of the processes and procedures described above, the reserves
carried for environmental and asbestos claims at June 30, 2002 are the Company's
best estimate of ultimate claims and claim adjustment expenses, based upon known
facts and current law. However, the uncertainties surrounding the final
resolution of these claims continue, which may result in the estimates being
subject to revision as new information becomes available. These include, without
limitation, the risks and lack of predictability inherent in major litigation,
any impact from the bankruptcy protection sought by various asbestos producers
and other asbestos defendants, a further increase or decrease in asbestos and
environmental claims which cannot now be anticipated, the role of any umbrella
or excess policies the Company has issued, the resolution or adjudication of
some disputes pertaining to the amount of available coverage for asbestos claims
in a manner inconsistent with the Company's previous assessment of these claims,
the number and outcome of direct actions against the Company, and future
developments pertaining to the Company's ability to recover reinsurance for
environmental and asbestos claims. It is also not possible to predict changes in
the legal and legislative environment and their impact on the future development
of asbestos and environmental claims. This development will be affected by
future court decisions and interpretations, as well as changes in applicable
legislation. It is also difficult to predict ultimate outcome of large claims
coverage disputes until settlement negotiations near completion and significant
legal questions are resolved or, failing settlement, until the dispute is
adjudicated. This is particularly the case with insureds in bankruptcy where
negotiations often involve a large number of claimants and other parties and
require court approval to be effective.

Because of the uncertainties set forth above, additional liabilities may arise
for amounts in excess of the current related reserves. These additional amounts,
or a range of these additional amounts, cannot now be reasonably estimated and
could result in liability exceeding the related reserves by an amount that could
be material to the Company's operating results and financial condition in future
periods. Because the level of uncertainty continues to increase and in order to
strengthen the Company's ability and flexibility to advance its strategic goals
following its initial public offering, Citigroup has entered into an agreement
under which it will provide TPC with significant financial support for asbestos
claims and related litigation, in any year that the Company's insurance
subsidiaries record asbestos-related income statement charges in excess of $150
million, net of any reinsurance up to a cumulative aggregate of $800 million,
reduced by the tax effect of the highest applicable federal income tax rate.


                                       35
<PAGE>
CUMULATIVE INJURY OTHER THAN ASBESTOS (CIOTA) CLAIMS

CIOTA claims are generally submitted to the Company under general liability
policies and often involve an allegation by a claimant against an insured that
the claimant has suffered injuries as a result of long-term or continuous
exposure to potentially harmful products or substances. These potentially
harmful products or substances include, but are not limited to, lead paint,
pesticides, pharmaceutical products, silicone-based personal products, solvents,
latex gloves, silica and other potentially harmful substances.

At June 30, 2002, approximately 81% (approximately $558 million) of the net
CIOTA reserve represents incurred but not reported losses for which the Company
has not received any specific claims. The balance, approximately 19% of the net
aggregate reserve (approximately $130 million), is for pending CIOTA claims.

The following table displays activity for CIOTA losses and loss expenses and
reserves:

<TABLE>
<CAPTION>
CIOTA LOSSES                                                AS OF AND FOR THE
                                                             SIX MONTHS ENDED
                                                                 JUNE 30,
(in millions)                                            2002             2001
                                                         -----          -------
<S>                                                      <C>            <C>
Beginning reserves:
  Direct                                                 $ 893          $ 1,079
  Ceded                                                   (183)            (280)
                                                         -----          -------
  Net                                                      710              799

Incurred losses and loss expenses:
  Direct                                                     9              (39)
  Ceded                                                    (11)              24

Losses paid:
  Direct                                                    23               24
  Ceded                                                     (3)             (11)
                                                         -----          -------

Ending reserves:
  Direct                                                   879            1,016
  Ceded                                                   (191)            (245)
                                                         -----          -------
    Net                                                  $ 688          $   771
                                                         -----          -------
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

TPC's principal asset is the capital stock of Travelers Insurance Group Holdings
Inc. (TIGHI) and its insurance subsidiaries.

The liquidity requirements of the Company's business have been met primarily by
funds generated from operations, asset maturities and income received on
investments. Cash provided from these sources is used primarily for claims and
claim adjustment expense payments and operating expenses. Catastrophe claims,
the timing and amount of which are inherently unpredictable, may create
increased liquidity requirements. Additional sources of cash flow include the
sale of invested assets and financing activities. In the opinion of the
Company's management, future liquidity needs will be met from all of the above
sources.


                                       36
<PAGE>
Net cash flows are generally invested in marketable securities. The Company
closely monitors the duration of these investments, and investment purchases and
sales are executed with the objective of having adequate funds available to
satisfy the Company's maturing liabilities. As the Company's investment strategy
focuses on asset and liability durations, and not specific cash flows, asset
sales may be required to satisfy obligations and/or rebalance asset portfolios.
The Company's invested assets at June 30, 2002 totaled $33.4 billion, of which
89% was invested in fixed maturity and short-term investments, 3% in common
stocks and other equity securities, 1% in mortgage loans and real estate and 7%
in other investments.

TPC's cash flow needs include shareholder dividends and debt service. TPC is a
holding company and has no direct operations. Accordingly, TPC meets its cash
flow needs primarily through dividends from operating subsidiaries. In addition,
TIGHI has available to it a $250 million revolving line of credit from
Citigroup. TIGHI pays a commitment fee to Citigroup for that line of credit,
which expires in 2006. The interest rate for borrowings under this committed
line is based on the cost of commercial paper issued by Citicorp. At June 30,
2002, there were no outstanding borrowings under this revolving line of credit.

Contractual obligations at June 30, 2002 included the following:

<TABLE>
<CAPTION>
                                                                      LESS
PAYMENTS DUE BY PERIOD                                               THAN 1        1-3          4-5      AFTER 5
(in millions)                                            TOTAL        YEAR       YEARS        YEARS        YEARS
                                                        ------       ------      -----       ------      -------
<S>                                                     <C>          <C>         <C>         <C>         <C>
Notes payable to affiliates                             $1,500       $1,000       $500       $   --       $   --
Long-term debt                                             380            3         11          157          209
Convertible junior subordinated notes payable              893           --         --           --          893
TIGHI-obligated mandatorily redeemable securities
  of subsidiary trusts holding solely junior
  subordinated debt securities of TIGHI                    900           --         --           --          900
Operating leases                                           456           99        131           73          153
                                                        ------       ------       ----       ------       ------
                                                        $4,129       $1,102       $642       $  230       $2,155
                                                        ------       ------       ----       ------       ------
</TABLE>

TIGHI has a $500 million line of credit agreement with Citicorp Banking
Corporation, an affiliate. This line of credit expires in December 2006. At June
30, 2002, there was $500 million of borrowings outstanding under this line of
credit at an interest rate of 3.6% and with payment due in November 2003.

TPC intends to pay quarterly cash dividends on all classes of the Company's
common stock at an initial rate of $0.06 per share of common stock, commencing
in the first quarter of 2003. The declaration and payment of future dividends to
holders of the Company's common stock will be at the discretion of the Company's
board of directors and will depend upon many factors, including the Company's
financial condition, earnings, capital requirements of TPC's operating
subsidiaries, legal requirements, regulatory constraints and other factors as
the board of directors deems relevant.

TPC's insurance subsidiaries are subject to various regulatory restrictions that
limit the maximum amount of dividends to be paid to their parent without prior
approval of insurance regulatory authorities. TPC's insurance subsidiaries paid
dividends of $550 million to TIGHI during the first six months of 2002. Any
dividends to be paid during the remainder of 2002 may be subject to approval by
the Connecticut Insurance Department.

Under TPC's certificate of incorporation, TPC may not pay any dividends on its
common stock, other than regular quarterly dividends, and has limited ability to
incur indebtedness, issue equity securities and make some capital expenditures,
among other things, without the prior consent of the holders of not less than a
majority of the class B common stock then outstanding, so long as Citigroup
beneficially owns shares entitled to twenty percent (20%) or more of the votes
entitled to be cast by the then outstanding Common Stock.


                                       37
<PAGE>
TPC has the option to defer interest payments on its convertible junior
subordinated notes for a period not exceeding 20 consecutive quarterly interest
periods. If TPC elects to defer interest payments on the notes, it will not be
permitted, with limited exceptions, to pay dividends on its common stock during
a deferral period.

In addition, the ability of TIGHI to pay TPC dividends is subject to the terms
of the TIGHI trust mandatorily redeemable securities (TIGHI Securities) which
prohibit TIGHI from paying dividends in the event it has failed to pay or has
deferred dividends or is in default under the TIGHI Securities.

In May 2002, the Company guaranteed certain debt obligations of TIGHI. If the
Company or TIGHI defaults on certain of their obligations related to the TIGHI
Securities, the Company may not declare or pay dividends on its capital stock or
take certain other actions related to its capital stock.

The Company, along with eight other sureties (collectively, "Sureties"),
provided surety bonds to affiliates of JPMorgan Chase in connection with
performance obligations of two subsidiaries of Enron. The Company is in
litigation (JPMorgan Chase Bank v. Liberty Mutual Insurance Company, et al.) in
New York over whether the Sureties are obligated to perform under these bonds.
In December 2001, Enron filed for Chapter 11 bankruptcy protection and JPMorgan
Chase made claims against these bonds. The demand against the Company, based on
the Company's aggregate participation in the bonds, is approximately $266
million before any reinsurance, recoveries and taxes. All defendants have filed
answers and counterclaims to the complaint. The plaintiff filed a motion for
summary judgment, which was denied. In June 2002, the plaintiff filed an amended
complaint adding fraudulent concealment allegations against the Sureties and
seeking additional relief, including punitive damages. In July 2002, the
Sureties filed a motion to dismiss this amended complaint. The Company is
vigorously defending the lawsuit and, in the opinion of the Company's
management, the Company has meritorious defenses.

The Company maintains property and casualty loss reserves to cover estimated
ultimate unpaid liability for losses and loss adjustment expenses with respect
to reported and unreported claims incurred as of the end of each accounting
period. Reserves do not represent an exact calculation of liability, but instead
represent estimates, generally utilizing actuarial projection techniques at a
given accounting date. These reserve estimates are expectations of what the
ultimate settlement and administration of claims will cost based on the
Company's assessment of facts and circumstances then known, review of historical
settlement patterns, estimates of trends in claims severity, frequency, legal
theories of liability and other factors. Variables in the reserve estimation
process can be affected by both internal and external events, such as changes in
claims handling procedures, economic inflation, legal 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. Reserve estimates are continually refined in a regular ongoing process
as historical loss experience develops and additional claims are reported and
settled. Adjustments to reserves are reflected in the results of the periods in
which the estimates are changed. Because establishment of reserves is an
inherently uncertain process involving estimates, currently established reserves
may not be sufficient. If estimated reserves are insufficient, the Company will
incur additional income statement charges.

During 2001, the Company recorded a charge of $490 million representing the
estimated loss for both reported and unreported claims incurred and related
claim adjustment expenses, net of reinsurance recoverables and taxes, related to
the terrorist attack on September 11th. The associated reserves and related
reinsurance recoverables represent the estimated ultimate net costs of all
incurred claims and claim adjustment expenses related to the attack. Since the
reserves and related reinsurance recoverables are based on estimates, the
ultimate net liability may be more or less than such amounts.


                                       38
<PAGE>
Some of the Company's loss reserves are for environmental and asbestos claims
and related litigation. Although the reserves carried for environmental and
asbestos claims at June 30, 2002 are the Company's best estimate of ultimate
claims and claim adjustment expenses based upon known facts and current law,
given the uncertainty surrounding the final resolution of these claims, it is
possible that actual liabilities could exceed reserves by an amount that could
be material to the Company's operating results and financial condition in future
periods. Because the level of uncertainty continues to increase and in order to
strengthen the Company's ability and flexibility to advance its strategic goals
following its initial public offering, the Company has entered into an agreement
with Citigroup under which Citigroup will provide the Company with significant
financial support for asbestos claims and related litigation, up to $800
million, reduced by the tax effect of the highest applicable federal income tax
rate. In the opinion of the Company's management, this agreement will
substantially enhance the Company's ability to manage possible adverse
developments in the future. See the preceding discussion of Environmental
Claims and Asbestos Claims above.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

See note 2 to the condensed consolidated financial statements for a discussion
of recently issued accounting pronouncements.

FORWARD-LOOKING STATEMENTS

Certain of the statements contained herein, and certain statements that the
Company may make in press releases and that Company officials may make orally,
that are not historical facts are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act. Forward-looking statements are
typically identified by words or phrases such as "believe," "expect,"
"anticipate," "intend," "estimate," "may increase," "may fluctuate," and similar
expressions or future or conditional verbs such as "will," "should," "would,"
and "could." These statements are not guarantees of future performance and
involve assumptions and known and unknown risks and uncertainties. Actual
outcomes and results may differ materially from those expressed or implied.

Factors that could cause actual outcomes and results to differ include, but are
not limited to: weakening global economic conditions; insufficiency of, or
changes in, loss reserves; the occurrence of catastrophic events, both natural
and man made, with a severity or frequency exceeding the Company's expectations;
exposure to, and adverse developments involving, asbestos and environmental
claims and related litigation, including the willingness of parties, including
the Company, to related litigation to settle disputes and the impact of
bankruptcies of various asbestos producers and related businesses; adverse
changes in loss cost trends, including as a result of inflationary pressures in
medical costs and auto and home repair costs; adverse developments in the cost,
availability and/or ability to collect reinsurance; changes in insurance and tax
laws and regulations; adverse outcomes in legal proceedings; judicial expansion
of policy coverage; larger than expected assessments for guaranty funds and
mandatory pooling arrangements; a downgrade in the Company's claims-paying and
financial strength ratings; the loss or significant restriction on the Company's
ability to use credit scoring in the pricing and underwriting of Personal Lines
policies; amendments to, and changes to the risk-based capital requirements; the
competitive environment; the impact of the terrorist attack on September 11th;
adverse developments in global financial markets, which could affect the
Company's investment portfolios and financing plans; and the potential impact of
the global war on terrorism and Federal proposals to make available insurance
coverage for acts of terrorism. The Company expressly disclaims any obligation
to update forward-looking statements.


                                       39
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and
prices, such as interest rates, foreign currency exchange rates, and other
relevant market rate or price changes. Market risk is directly influenced by the
volatility and liquidity in the markets in which the related underlying assets
are traded. Changes in the Company's long-term debt and notes payable to
affiliates have occurred since December 31, 2001. The primary market risk for
these market sensitive instruments is interest rate risk at the time of
refinancing. For information regarding the Company's notes payable to affiliates
and long-term debt, see note 7 to the condensed consolidated financial
statements.

The Company analyses quantitative information about market risk based on a
sensitivity analysis model. As of June 30, 2002, the changes in the Company's
primary market risk exposures that have occurred since December 31, 2001 did not
result in a material change in the loss in fair value of market sensitive
instruments based on the Company's sensitivity analysis model.


                                       40
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1. 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 are a party or to which any of the Company's property is subject.

Beginning in January 1997, various plaintiffs commenced a series of purported
class actions and one multi-party action in various courts against some of the
Company's subsidiaries, dozens of other insurers and the National Council on
Compensation Insurance, or the NCCI. The allegations in the actions are
substantially similar. The plaintiffs generally allege that the defendants
conspired to collect excessive or improper premiums on 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. After several voluntary dismissals, refilings and
consolidations, actions are, or until recently were, pending in the following
jurisdictions: Georgia (Melvin Simon & Associates, Inc., et al. v. Standard Fire
Insurance Company, et al.); Tennessee (Bristol Hotel Asset Company, et al. v.
The Aetna Casualty and Surety Company, et al.); Florida (Bristol Hotel Asset
Company, et al. v. Allianz Insurance Company, et al. and Bristol Hotel
Management Corporation, et al. v. Aetna Casualty & Surety Company, et al.); New
Jersey (Foodarama Supermarkets, Inc., et al. v. Allianz Insurance Company, et
al.); Illinois (CR/PL Management Co., et al. v. Allianz Insurance Company Group,
et al.); Pennsylvania (Foodarama Supermarkets, Inc. v. American Insurance
Company, et al.); Missouri (American Freightways Corporation, et al. v. American
Insurance Co., et al.); California (Bristol Hotels & Resorts, et al. v. NCCI, et
al.); Texas (Sandwich Chef of Texas, Inc., et al. v. Reliance National Indemnity
Insurance Company, et al.); Alabama (Alumax Inc., et al. v. Allianz Insurance
Company, et al.); Michigan (Alumax, Inc., 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. American Motorists Insurance Company, et
al.); and Arizona (Albany International Corp. v. American Home Assurance
Company, et al.). The Company has vigorously defended all of these cases and
intends to continue doing so.

The trial courts have ordered dismissal of the California, Pennsylvania and New
York cases, and partial dismissals of six others: those pending in Tennessee,
New Jersey, Illinois, Missouri, Alabama and Arizona. The trial courts in
Georgia, Kentucky, Texas, and Michigan have denied defendants' motions to
dismiss. The California appellate court has reversed the trial court in part and
ordered reinstatement of most claims, while the New York appellate court has
affirmed dismissal in part and allowed plaintiffs to dismiss their remaining
claims voluntarily. The Michigan, Pennsylvania and New Jersey courts have denied
class certification, while the Texas court has granted class certification. The
New Jersey appellate court denied plaintiffs' request to appeal. Defendants'
appeal of the Texas class certification decision is pending. The plaintiffs have
now voluntarily dismissed the New York case and, in July 2002, the Michigan
proceeding as well.

The Company, along with eight other sureties (collectively, "Sureties"),
provided surety bonds to affiliates of JPMorgan Chase in connection with
performance obligations of two subsidiaries of Enron. The Company is in
litigation (JPMorgan Chase Bank v. Liberty Mutual Insurance Company, et al.) in
New York over whether the Sureties are obligated to perform under these bonds.
In December 2001, Enron filed for Chapter 11 bankruptcy protection and JPMorgan
Chase made claims against these bonds. The demand against the Company, based on
the Company's aggregate participation in the bonds, is approximately $266
million before any reinsurance, recoveries and taxes. All defendants have filed
answers and counterclaims to the complaint. The plaintiff filed a motion for
summary judgment, which was denied. In June 2002, the plaintiff filed an amended
complaint adding fraudulent concealment allegations against the Sureties and
seeking additional relief, including punitive damages. In July 2002, the
Sureties filed a motion to dismiss this amended complaint. The Company is
vigorously defending the lawsuit and, in the opinion of the Company's
management, the Company has meritorious defenses.


                                       41
<PAGE>
The Company is increasingly becoming subject to more aggressive asbestos-related
litigation, and the Company expects this trend to continue. In October 2001 and
April 2002, two purported class action suits (Wise v. Travelers and Meninger v.
Travelers) were filed against the Company and other insurers in state court in
West Virginia. The plaintiffs in these cases, which were subsequently
consolidated into a single proceeding, allege that the insurer defendants
violated the West Virginia Unfair Trade Practice Act while handling and settling
various asbestos claims. The plaintiffs seek to reopen large numbers of settled
asbestos claims and to impose liability for damages, including punitive damages,
directly on insurers. In November 2001, the Company received notice of a
potential class action, and in May 2002, a purported class action (Cashman v.
Travelers) was filed in Massachusetts state court. The complaint in Cashman v.
Travelers and the notice of potential class action contain allegations similar
to those asserted in the Wise case, and seek treble damages under Massachusetts
law. Also, in November 2001, plaintiffs in consolidated asbestos actions pending
before a mass tort panel of judges in West Virginia state court moved to amend
their complaint to name the Company as a defendant, alleging that the Company
and other insurers breached alleged duties to certain users of asbestos
products. In March 2002, the court granted the motion to amend. Plaintiffs seek
damages, including punitive damages. Lawsuits seeking similar relief and raising
allegations similar to those presented in the West Virginia amended complaint
are also pending against the Company in Louisiana, Massachusetts, Georgia, and
Texas state courts.

All of the actions described in the preceding paragraph are currently subject to
a temporary restraining order entered by the federal bankruptcy court in New
York, which had previously presided over and approved the reorganization in
bankruptcy of former Travelers policyholder Johns Manville. In August 2002, the
bankruptcy court conducted a hearing on Travelers motion for a preliminary
injunction prohibiting further prosecution of the lawsuits pursuant to the
reorganization plan and related orders. At the conclusion of this hearing, the
court ordered the parties to mediation, appointed a mediator, and continued the
temporary restraining order.

In the ordinary course of business, the Company's subsidiaries receive claims
asserting alleged injuries and damages from asbestos and other hazardous waste
and toxic substances and are subject to related coverage litigation. The
conditions surrounding the final resolution of these claims and the related
litigation 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 and litigation. This development will be affected by
future court decisions and interpretations, as well as changes in applicable
legislation. Because of these future unknowns, additional liabilities may arise
for amounts in excess of the current related reserves. These additional amounts,
or a range of these additional amounts, cannot now be reasonably estimated and
could result in liability exceeding the related reserves by an amount that could
be material to the Company's operating results and financial condition in future
periods. The Company is defending its environmental and asbestos-related
litigation vigorously and believes that it has meritorious defenses. In this
regard, the Company employs dedicated specialists and aggressive resolution
strategies to manage environmental and asbestos loss exposure, including
settling litigation under appropriate circumstances. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Environmental Claims, - Asbestos Claims and - Uncertainty Regarding Adequacy of
Environmental and Asbestos Reserves."

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

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

In May 2002, the Company guaranteed certain debt obligations of its subsidiary,
Travelers Insurance Group Holdings, Inc. (TIGHI). If the Company or TIGHI
defaults on certain of their obligations related to TIGHI's $900 million trust
mandatorily redeemable securities, the Company may not declare or pay dividends
on its capital stock or take certain other actions related to its capital stock.


                                       42
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)   EXHIBITS:

      See Exhibit Index.

(b)   REPORTS ON FORM 8-K:

On April 15, 2002, the Company filed a Current Report on Form 8-K, dated April
15, 2002, reporting under Item 5 thereof the results of the Company's operations
for the quarter ended March 31, 2002, and certain other selected financial data.

On May 10, 2002, the Company filed a Current Report on Form 8-K, dated May 9,
2002, reporting under Item 5 thereof the appointment of new board members.

No other reports on Form 8-K were filed during the 2002 second quarter; however,

On July 18, 2002, the Company filed a Current Report on Form 8-K dated July 17,
2002, reporting under Item 5 thereof the results of the Company's operations for
the quarter ended June 30, 2002, and certain other selected financial data.

On August 2, 2002, the Company filed a Current Report on Form 8-K dated August
1, 2002, reporting under Item 5 thereof that Citigroup declared a distribution
of shares of the Company and the dates for the distribution.


                                       43
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number      Description of Exhibit
-------     ----------------------
<S>         <C>
3.1.1       Restated Certificate of Incorporation of the Company, effective
            March 19, 2002, was filed as Exhibit 3.1.1 to the Company's
            quarterly report on Form 10-Q for the fiscal quarter ended March 31,
            2002, and is incorporated herein by reference.

3.1.2       Amendment to Restated Certificate of Incorporation of the Company,
            effective March 20, 2002, was filed as Exhibit 3.1.2 to the
            Company's quarterly report on Form 10-Q for the fiscal quarter ended
            March 31, 2002, and is incorporated herein by reference.

3.2         Amended and Restated Bylaws of the Company, effective March 19,
            2002, was filed as Exhibit 3.2 to the Company's quarterly report on
            Form 10-Q for the fiscal quarter ended March 31, 2002, and is
            incorporated herein by reference.

10.1        First Supplemental Indenture dated May 10, 2002, by and among the
            Company, Travelers Insurance Group Holdings, Inc. (TIGHI) and Bank
            One Trust Company, N.A, as trustee, relating to $200,000,000
            aggregate principal amount of TIGHI's 7 3/4% Notes due 2026 and
            $150,000,000 aggregate principal amount of TIGHI's 6 3/4% Notes due
            2006, was filed as Exhibit 4.1 to TIGHI's current report on Form 8-K
            dated May 14, 2002, and is incorporated herein by reference.

10.2        First Supplemental Indenture dated May 10, 2002, by and among the
            Company, TIGHI, and JPMorgan Chase Bank, as trustee, relating to
            TIGHI's $800,000,000 aggregate principal amount 8.08% Junior
            Subordinated Deferrable Interest Debentures due 2036, and
            $100,000,000 aggregate principal amount 8.0% Junior Subordinated
            Deferrable Interest Debentures due 2036, was filed as Exhibit 4.2 to
            TIGHI's current report on Form 8-K dated May 14, 2002, and is
            incorporated herein by reference.

10.3        Amended and Restated Preferred Securities Guarantee Agreement dated
            May 10, 2002, by and among the Company, TIGHI and JPMorgan Chase
            Bank, as trustee, relating to 32,000,000 preferred securities,
            designated the 8.08% Trust Preferred Securities, having an aggregate
            liquidation amount of $800,000,000, issued by Travelers P & C
            Capital I, was filed as Exhibit 4.3 to TIGHI's current report on
            Form 8-K dated May 14, 2002, and is incorporated herein by
            reference.

10.4        Amended and Restated Preferred Securities Guarantee Agreement dated
            May 10, 2002, by and among the Company, TIGHI, and JPMorgan Chase
            Bank, as trustee, relating to 4,000,000 preferred securities,
            designated the 8.0% Trust Preferred Securities, having an aggregate
            liquidation amount of $100,000,000, issued by Travelers P & C
            Capital II, was filed as Exhibit 4.4 to TIGHI's current report on
            Form 8-K dated May 14, 2002, and is incorporated herein by
            reference.

10.5        Promissory note dated February 7, 2002, between the Company and
            Citicorp was filed as exhibit 10.4.1 to the Company's Registration
            Statement on Form S-1 (Amendment No. 2) dated March 5, 2002
            (Registration No. 333-82388) and is incorporated herein by
            reference.

10.6        Promissory note dated February 7, 2002, between the Company and PFS
            Services, Inc. was filed as exhibit 10.4.2 to the Company's
            Registration Statement on Form S-1 (Amendment No. 2) dated March 5,
            2002 (Registration No. 333-82388) and is incorporated herein by
            reference.

10.7        Promissory note dated February 7, 2002, between the Company and PFS
            Services, Inc. was filed as exhibit 10.4.3 to the Company's
            Registration Statement on Form S-1 (Amendment No. 2) dated March 5,
            2002 (Registration No. 333-82388) and is incorporated herein by
            reference.
</TABLE>


                                       44
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number      Description of Exhibit
-------     ----------------------
<S>         <C>
10.8+       Travelers Property Casualty Corp. Compensation Plan for Non-Employee
            Directors.

10.9+       Travelers Property Casualty Corp. Executive Performance Plan.

10.10+      Travelers Property Casualty Corp. 2002 Stock Incentive Plan.

10.11+      Employment Agreement between the Company and Robert I. Lipp dated
            March 7, 2002.

10.12+      Employment Letter Agreement dated May 22, 2002 between the Company
            and Maria Olivo, Executive Vice President of the Company.

99.1+       Certification of Robert I. Lipp, Chief Executive Officer of the
            Company, as required by Section 906 of the Sarbanes-Oxley Act of
            2002.

99.2+       Certification of Jay S. Benet, Chief Financial Officer of the
            Company, as required by Section 906 of the Sarbanes-Oxley Act of
            2002.
</TABLE>
----------
+     Filed herewith.


                                       45
<PAGE>
                                   SIGNATURES

Pursuant to the requirements 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.

<TABLE>
<S>                                     <C>
                                        TRAVELERS PROPERTY CASUALTY CORP.


Date: August 12, 2002                   By /s/ Jay S. Benet
                                           -------------------------------------
                                               Jay S. Benet
                                               Chief Financial Officer
                                               (Principal Financial Officer)


Date: August 12, 2002                   By /s/ Douglas K. Russell
                                           -------------------------------------
                                               Douglas K. Russell
                                               Chief Accounting Officer
                                               (Principal Accounting Officer)
</TABLE>


                                       46