<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 SEPTEMBER 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)

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

                  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 OCTOBER 31, 2002:

<TABLE>
                     <S>                       <C>
                     CLASS A                   503,663,977
                     CLASS B                   499,999,482
</TABLE>
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                    Page No.
                                                                                    --------
<S>                                                                                 <C>
                         Part I - Financial Information

Item 1. Financial Statements:

        Condensed Consolidated Statement of Income (Unaudited) -
           Three and Nine Months Ended September 30, 2002 and 2001                      3

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

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

        Condensed Consolidated Statement of Cash Flows (Unaudited) -
           Nine Months Ended September 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                                                   25

Item 3. Quantitative and Qualitative Disclosures About Market Risk                     52

Item 4. Controls and Procedures                                                        52

                           Part II - Other Information

Item 1. Legal Proceedings                                                              53

Item 6. Exhibits and Reports on Form 8-K                                               56

Signatures                                                                             57

Certifications                                                                         58

Exhibit Index                                                                          60
</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                NINE MONTHS ENDED
                                                                        SEPTEMBER 30,                     SEPTEMBER 30,
                                                                        -------------                     -------------
                                                                    2002             2001             2002             2001
                                                                    ----             ----             ----             ----
<S>                                                              <C>              <C>              <C>              <C>
REVENUES
Premiums                                                         $  2,875.3       $  2,314.2       $  8,216.6       $  6,836.9
Net investment income                                                 440.7            488.1          1,393.3          1,535.2
Fee income                                                            118.6             93.2            330.1            254.8
Realized investment gains (losses)                                    (51.3)            96.3            (58.5)           337.9
Other revenues                                                        180.6             20.7            234.9             88.8
                                                                 ----------       ----------       ----------       ----------
  Total revenues                                                    3,563.9          3,012.5         10,116.4          9,053.6
                                                                 ----------       ----------       ----------       ----------

CLAIMS AND EXPENSES
Claims and claim adjustment expenses                                2,370.0          2,428.5          6,450.4          5,810.7
Amortization of deferred acquisition costs                            462.3            380.8          1,334.8          1,103.2
Interest expense                                                       40.4             46.4            116.0            164.8
General and administrative expenses                                   351.6            309.4            986.1            989.6
                                                                 ----------       ----------       ----------       ----------
  Total claims and expenses                                         3,224.3          3,165.1          8,887.3          8,068.3
                                                                 ----------       ----------       ----------       ----------

Income (loss) before federal income taxes,
  cumulative effect of changes in accounting
  principles and minority interest                                    339.6           (152.6)         1,229.1            985.3
Federal income taxes (benefit)                                          6.0            (92.7)           218.8            226.4
Minority interest, net of tax                                           1.3               --              1.3               --
                                                                 ----------       ----------       ----------       ----------

INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGES IN
  ACCOUNTING PRINCIPLES                                               332.3            (59.9)         1,009.0            758.9
Cumulative effect of change in accounting for:
  Goodwill and other intangible assets, net of tax                       --               --           (242.6)              --
  Derivative instruments and hedging activities, net of tax              --               --               --              4.5
  Securitized financial assets, net of tax                               --               --               --             (1.3)
                                                                 ----------       ----------       ----------       ----------
NET INCOME (LOSS)                                                $    332.3       $    (59.9)      $    766.4       $    762.1
                                                                 ==========       ==========       ==========       ==========

BASIC EARNINGS PER SHARE
Income (loss) before cumulative effect of changes in
  accounting principles                                          $     0.33       $    (0.08)      $     1.08       $     0.99
Cumulative effect of changes in accounting principles                    --               --            (0.26)              --
                                                                 ----------       ----------       ----------       ----------
Net income (loss)                                                $     0.33       $    (0.08)      $     0.82       $     0.99
                                                                 ==========       ==========       ==========       ==========

Weighted average number of common shares outstanding                1,000.0            769.0            932.3            769.0
                                                                 ==========       ==========       ==========       ==========

DILUTED EARNINGS PER SHARE
Income (loss) before cumulative effect of changes in
  accounting principles                                          $     0.33       $    (0.08)      $     1.08       $     0.99
Cumulative effect of changes in accounting principles                    --               --            (0.26)              --
                                                                 ----------       ----------       ----------       ----------
Net income (loss)                                                $     0.33       $    (0.08)      $     0.82       $     0.99
                                                                 ==========       ==========       ==========       ==========

Weighted average number of common shares outstanding
  and common stock equivalents                                      1,002.0            769.0            933.0            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>
                                                                        SEPTEMBER 30,
                                                                            2002        DECEMBER 31,
                                                                        (UNAUDITED)        2001
                                                                        -----------        ----
<S>                                                                     <C>             <C>
ASSETS
Fixed maturities, available for sale at fair value (including
  $655.8 and $975.7 subject to securities lending agreements)
  (amortized cost $27,407.3 and $25,460.5)                                $28,805.4       $25,850.7
Equity securities, at fair value (cost $923.0 and $1,052.2)                   929.3         1,055.7
Mortgage loans                                                                260.3           274.4
Real estate held for sale                                                      39.0            38.3
Short-term securities                                                       3,078.4         2,798.3
Trading securities, at fair value                                              37.1           628.1
Other investments                                                           2,284.1         1,973.1
                                                                          ---------       ---------
  Total investments                                                        35,433.6        32,618.6
                                                                          ---------       ---------

Cash                                                                          232.8           236.9
Investment income accrued                                                     368.7           359.5
Premium balances receivable                                                 3,884.5         3,657.0
Reinsurance recoverables                                                   10,346.8        11,047.3
Deferred acquisition costs                                                    874.5           768.1
Deferred federal income taxes                                                 754.6         1,182.4
Contractholder receivables                                                  2,248.7         2,197.8
Goodwill                                                                    2,411.5         2,576.5
Receivables for investment sales                                              309.7           129.7
Other assets                                                                2,833.0         3,004.0
                                                                          ---------       ---------
  Total assets                                                            $59,698.4       $57,777.8
                                                                          =========       =========

LIABILITIES
Claims and claim adjustment expense reserves                              $30,550.6       $30,736.6
Unearned premium reserves                                                   6,406.5         5,666.9
Contractholder payables                                                     2,248.7         2,197.8
Notes payable to former affiliates                                          1,500.0         1,697.7
Long-term debt                                                                376.8           379.8
Convertible junior subordinated notes payable                                 867.6              --
Convertible notes payable                                                      49.7              --
Payables for investment purchases                                           1,248.4           485.2
Securities lending payable                                                    672.7         1,001.7
Other liabilities                                                           3,717.1         4,025.8
                                                                          ---------       ---------
  Total liabilities                                                        47,638.1        46,191.5
                                                                          ---------       ---------
TIGHI-obligated mandatorily redeemable securities of
  subsidiary trusts holding solely junior subordinated
  debt securities of TIGHI                                                    900.0           900.0
                                                                          ---------       ---------

SHAREHOLDERS' EQUITY
Common Stock:
   Class A, $.01 par value, 1.5 billion shares authorized,
     503.3 million issued and outstanding at September 30,
     2002; 269.0 million issued and outstanding at December 31, 2001            5.0             2.7
   Class B, $.01 par value, 1.5 billion shares authorized,
     500.0 million issued and outstanding                                       5.0             5.0
Additional paid-in capital                                                  8,591.8         4,433.0
Retained earnings                                                           1,674.9         6,004.2
Accumulated other changes in equity from nonowner sources                     915.1           241.4
Treasury stock, at cost (shares 83,580 and 0)                                  (1.1)             --
Unearned compensation                                                         (30.4)             --
                                                                          ---------       ---------
  Total shareholders' equity                                               11,160.3        10,686.3
                                                                          ---------       ---------
  Total liabilities and shareholders' equity                              $59,698.4       $57,777.8
                                                                          =========       =========
</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 Nine Months Ended September 30, 2002                                DOLLARS         SHARES
--------------------------------------------                                -------         ------
<S>                                                                        <C>            <C>
COMMON STOCK AND ADDITIONAL PAID IN CAPITAL
PAID-IN CAPITAL

Balance, beginning of period                                               $ 4,440.7           769.0
Net proceeds from initial public offering                                    4,089.5           231.0
Employee stock-based compensation plans                                         55.6             3.4
Other                                                                           16.0              --
                                                                           ---------       ---------
Balance, end of period                                                       8,601.8         1,003.4
                                                                           ---------       ---------
RETAINED EARNINGS

Balance, beginning of period                                                 6,004.2
Net income                                                                     766.4
Receipts from former subsidiary                                                157.5
Dividends                                                                   (5,253.2)
                                                                           ---------
Balance, end of period                                                       1,674.9
                                                                           ---------

ACCUMULATED OTHER CHANGES IN EQUITY FROM NONOWNER SOURCES, NET OF TAX
Balance, beginning of period                                                   241.4
Net unrealized gain on investment securities                                   657.1
Other                                                                           16.6
                                                                           ---------
Balance, end of period                                                         915.1
                                                                           ---------

TREASURY STOCK (AT COST)

Balance, beginning of year                                                        --              --
Net employee stock-based compensation plans                                     (1.1)           (0.1)
                                                                           ---------       ---------
Balance, end of period                                                          (1.1)           (0.1)
                                                                           ---------       ---------

UNEARNED COMPENSATION
Balance, beginning of year                                                        --
Net issuance of restricted stock under employee stock-based
    compensation plans                                                         (30.4)
                                                                           ---------
Balance, end of period                                                         (30.4)
                                                                           ---------       ---------
    Total shareholders' equity and shares outstanding                      $11,160.3         1,003.3
                                                                           =========       =========
</TABLE>

           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 Nine Months Ended September 30,                                                     2002            2001
---------------------------------------                                                     ----            ----
<S>                                                                                      <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES

  Net income                                                                             $   766.4       $   762.1
  Adjustments to reconcile net income to net cash provided by operating activities:
    Realized investment (gains) losses                                                        58.5          (337.9)
    Cumulative effect of changes in accounting principles, net of tax                        242.6            (3.2)
    Depreciation and amortization                                                             30.6            91.3
    Deferred federal income taxes                                                            (72.0)            2.5
    Amortization of deferred policy acquisition costs                                      1,334.8         1,103.2
    Premium balances receivable                                                             (227.5)         (310.2)
    Reinsurance recoverables                                                                 700.5        (1,147.7)
    Deferred policy acquisition costs                                                     (1,441.2)       (1,198.4)
    Insurance reserves                                                                       553.6         1,863.0
    Trading account activities                                                               117.9           (57.9)
    Other                                                                                    127.0          (168.8)
                                                                                         ---------       ---------
       Net cash provided by operating activities                                           2,191.2           598.0
                                                                                         ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from maturities of investments
    Fixed maturities                                                                       1,814.7         1,403.9
    Mortgage loans                                                                            14.1            13.5
  Proceeds from sales of investments
    Fixed maturities                                                                       9,067.2        11,296.1
    Equity securities                                                                        373.0           369.7
    Real estate held for sale                                                                  0.7              --
  Purchases of investments

    Fixed maturities                                                                     (13,028.6)      (12,133.0)
    Equity securities                                                                       (248.6)         (185.0)
    Mortgage loans                                                                              --            (3.0)
    Real estate held for sale                                                                 (1.2)           (5.2)
 Short-term securities, (purchases) sales, net                                              (280.1)         (459.5)
 Other investments, net                                                                      413.6          (280.7)
 Securities transactions in course of settlement                                             234.0           (14.5)
                                                                                         ---------       ---------
       Net cash provided by (used in) investing activities                                (1,641.2)            2.3
                                                                                         ---------       ---------
</TABLE>

                                   -Continued-

            See notes to condensed consolidated financial statements


                                       6
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited), Continued
                                  (in millions)

<TABLE>
<CAPTION>
For the Nine Months Ended September 30,                                2002            2001
---------------------------------------                                ----            ----
<S>                                                                 <C>             <C>
CASH FLOWS FROM FINANCING ACTIVITIES

  Issuance of convertible notes, net                                    917.3              --
  Issuance of short-term debt                                              --           211.8
  Payment of long-term debt                                              (3.0)         (500.0)
  Issuance of note payable to former affiliate                             --           275.0
  Payment on note payables to former affiliates                      (5,299.0)         (540.0)
  Initial public offering                                             4,089.5              --
  Receipts from former affiliates                                       157.5           473.0
  Dividend to former affiliate                                         (157.5)         (526.0)
  Payment of dividend on subsidiary's preferred stock                    (0.9)             --
 Purchase of real estate from former affiliate                          (68.2)             --
 Transfer of employee benefit obligations to former affiliates         (172.4)             --
 Transfer of lease obligations to former affiliate                      (87.8)             --
 Minority investment in subsidiary                                       89.5              --
 Other                                                                  (19.1)             --
                                                                    ---------       ---------
     Net cash used in financing activities                             (554.1)         (606.2)
                                                                    ---------       ---------

Net decrease in cash                                                     (4.1)           (5.9)
Cash at beginning of period                                             236.9           196.3
                                                                    ---------       ---------
Cash at end of period                                               $   232.8       $   190.4
                                                                    =========       =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

  Income taxes paid                                                 $    83.2       $   355.3
  Interest paid                                                     $    90.0       $    79.8
                                                                    =========       =========
</TABLE>

            See notes to condensed consolidated financial statements


                                       7
<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. (TPC) 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).

      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. In
      addition, certain reclassifications have been made to the prior year's
      financial statements to conform to the current year's presentation.

      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 formerly 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.

      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 Inc. (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 share of which is
      entitled to one vote, representing at the time 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 $892.5 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 $395.0 million, aggregating $5.095 billion, which were each in
      the form of notes payable to Citigroup. The proceeds of the offerings were
      used to prepay the $395.0 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 in which the Company records
     additional asbestos-related income statement charges in excess of $150.0
     million, net of any reinsurance, Citigroup will pay to the Company the
     amount of any such excess up to a cumulative aggregate of $800.0 million,
     reduced by the tax effect of the highest applicable federal income tax
     rate. During the quarter ended September 30, 2002, the Company recorded
     $245.0 million of asbestos incurred losses, net of reinsurance, in excess
     of the annual deductible. For the three and nine months ended September 30,
     2002, other revenues include $159.3 million recoverable from Citigroup
     under this agreement. Included in federal income taxes in the condensed
     consolidated statement of income is a tax benefit of $85.7 million related
     to the asbestos charge. After the current quarter charge, $555.0 million of
     future recoveries (including tax benefits) remains available under this
     agreement (see note 10).


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

1.    General, Continued

      On August 20, 2002, Citigroup made a tax-free distribution to its
      stockholders (the Citigroup Distribution), of a portion of its ownership
      interest in TPC, which, together with the shares issued in the IPO,
      represented more than 90% of TPC's common equity and more than 90% of the
      combined voting power of TPC's outstanding voting securities. For each 100
      shares of Citigroup outstanding common stock, approximately 4.32 shares of
      TPC class A common stock and 8.88 shares of TPC class B common stock were
      distributed. At September 30, 2002, Citigroup was a holder of 9.96% of
      TPC's common equity and 9.98% of the combined voting power of TPC's
      outstanding voting securities. Citigroup received a private letter ruling
      from the Internal Revenue Service that the Citigroup Distribution is
      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 Citigroup Distribution pro rata with the shares held by the
      public and to divest the remaining shares it holds within five years
      following the Citigroup Distribution.

      On August 20, 2002, in connection with the Citigroup Distribution,
      stock-based awards held by Company employees on that date under
      Citigroup's various incentive plans were cancelled and replaced by awards
      under the Company's own incentive programs (see note 9), which awards were
      granted on substantially the same terms, including vesting, as the former
      Citigroup awards. In the case of Citigroup Capital Accumulation Plan
      awards of restricted stock and deferred shares, the unvested outstanding
      awards were cancelled and replaced by awards comprising 3.1 million of
      newly issued shares of TPC class A common stock at a total market value of
      $53.3 million based on the closing price of the class A common stock on
      August 20, 2002. The value of these newly issued shares along with the TPC
      class A and class B common stock received in the Citigroup Distribution on
      the Citigroup restricted shares, were equal to the value of the cancelled
      Citigroup restricted share awards. In the case of Citigroup stock option
      awards, all outstanding vested and unvested awards held by Company
      employees were cancelled and replaced with options to purchase the TPC
      class A common stock. The total number of the TPC class A common stock
      subject to the replacement option awards was 56.9 million shares of which
      24.6 million were then exercisable. The number of shares of the TPC class
      A common stock to which the replacement options relates and the per share
      exercise price of the replacement options were determined so that:

            -     The intrinsic value of each Citigroup option, which was the
                  difference between the closing price of Citigroup's common
                  stock on August 20, 2002 and the exercise price of the
                  Citigroup options, was preserved in each replacement option
                  for the Company's class A common stock.

            -     The ratio of the exercise price of the replacement option to
                  the closing price of the Company's class A common stock on
                  August 20, 2002, immediately after the Citigroup Distribution,
                  was the same as the ratio of the exercise price of the
                  Citigroup option to the price of Citigroup common stock
                  immediately before the Citigroup Distribution.

      TPC's consolidated financial statements include the accounts of its
      primary subsidiary, Travelers Insurance Group Holdings Inc. (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 $402.6 million, its net book value. The Company
      has applied $137.8 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 $68.2
      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 $172.4 million and $87.8 million, respectively, to Citigroup
      affiliated companies.


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

1.    General, Continued

      Prior to the Citigroup Distribution, the Company provided and purchased
      services to and from Citigroup affiliated companies, including facilities
      management, banking and financial functions, benefit coverages, data
      processing services, and short-term investment pool management services.
      Charges for these shared services were allocated at cost. In connection
      with the Citigroup Distribution, the Company and Citigroup and its
      affiliates entered into a transition services agreement for the provision
      of these services, tradename and trademark and similar agreements related
      to the use of trademarks, logos and tradenames and 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. On August 6, 2002, the
      Company entered into an investment management agreement, which has been
      applied retroactively to April 1, 2002, with an affiliate of Citigroup
      whereby the affiliate of Citigroup is providing investment advisory and
      administrative 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. Charges incurred related
      to this agreement were $28.1 million for the period from April 1, 2002
      through September 30, 2002. Either party may terminate the agreement
      effective on or after March 31, 2003 upon 90 days prior notice. The
      Company and Citigroup also agreed upon the allocation or transfer of
      certain other liabilities and assets, and rights and obligations in
      furtherance of the separation of operations and ownership as a result of
      the Citigroup Distribution. The net effect of these allocations and
      transfers, in the opinion of management, were not significant to the
      Company's results of operations or financial condition.

      Certain equity securities with readily determinable fair values in the
      amount of $361.2 million and owned directly by the Company were reported
      in trading securities at December 31, 2001. As part of the Citigroup
      Distribution, these investments have been restructured such that the
      Company no longer controls the investments. As a result, these investments
      are now equity securities accounted for under the equity method. There is
      no impact on earnings related to this change. These investments have been
      reclassified to other investments. In addition, similar investments
      included in equity securities at December 31, 2001, in the amount of $31.4
      million and $26.6 million at September 30, 2002 and December 31, 2001,
      respectively, have been reclassified to other investments. Other
      investments includes common stocks, limited partnerships and real estate
      joint ventures accounted for under the equity method.

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.


                                       10
<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 nine months ended September 30, 2001 are as follows:

<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED     NINE MONTHS ENDED
(in millions, except per share data)       SEPTEMBER 30, 2001     SEPTEMBER 30, 2001
------------------------------------       ------------------     ------------------
<S>                                        <C>                    <C>
NET INCOME (LOSS)
 Reported net income (loss)                    $  (59.9)              $  762.1
 Goodwill amortization                             17.9                   53.7
                                               --------               --------
 Adjusted net income (loss)                    $  (42.0)              $  815.8
                                               ========               ========

BASIC AND DILUTED EARNINGS PER SHARE

 Reported earnings per share (loss)            $  (0.08)              $   0.99
 Goodwill amortization                             0.03                   0.08
                                               --------               --------
 Adjusted earnings per share (loss)            $  (0.05)              $   1.07
                                               ========               ========
</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 $220.0 million of
      goodwill and $22.6 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 $470.6 million as of both September 30, 2002 and December 31,
      2001, and with accumulated amortization of $82.0 million and $55.4 million
      as of September 30, 2002 and December 31, 2001, respectively, which are
      included in other assets in the condensed consolidated balance sheet.
      Amortization expense was $8.9 million and $7.5 million for the three month
      periods ended September 30, 2002 and 2001, respectively, and was $26.6
      million and $25.6 million for the nine month periods ended September 30,
      2002 and 2001, respectively. Intangible assets amortization expense is
      estimated to be $8.9 million for the remainder of 2002, $35.4 million in
      2003, $34.0 million in 2004, $31.1 million in 2005 and $29.6 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.


                                       11
<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 American Institute of
      Certified Public Accountants Accounting Standards Executive Committee
      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 $4.5
      million after tax, reflected as a cumulative catch-up adjustment in the
      condensed consolidated statement of income and a charge of $4.0 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 $8.0 million
      after tax, reflected in realized investment gains (losses).


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

2.    Changes in Accounting Principles, Continued

      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 on and impairment of 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 EITF 99-20 is to be recognized prospectively. As a
      result of adopting EITF 99-20, the Company recorded a charge of $1.3
      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.

3.    Changes in Balance Sheet Presentation

      The following balance sheet line items have been presented as separate
      line items in the consolidated balance sheet. Prior periods have been
      reclassified to conform to this presentation. Previously these items were
      included in either Other Assets or Other Liabilities.

      Receivables for Investment Sales

      Represents amounts due the Company from investment brokers for securities
      sold, which are recorded as of trade date, for which the Company, in the
      normal course of securities settlement, has not yet received the proceeds.

      Payables for Investment Purchases

      Represents amounts owed by the Company to investment brokers for
      securities purchased, which are recorded as of trade date, for which the
      Company, in the normal course of securities settlement, has not yet
      settled the purchase.

      Securities Lending Payable

      The Company engages in securities lending whereby certain securities from
      its portfolio are loaned to other institutions for short periods of time.
      The Company generally maintains cash collateral received from the
      borrower, equal to at least the market value of the loaned securities plus
      accrued interest, and reinvests it in a short-term investment pool. The
      loaned securities remain a recorded asset of the Company; however, the
      Company records a liability for the amount of the collateral held,
      representing its obligation to return the collateral related to these
      loaned securities.


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

4.    Accounting Standards Not Yet Adopted

      Stock-Based Compensation

      Effective January 1, 2003, the Company will adopt the fair value method of
      accounting for its employee stock-based compensation plans as defined in
      Statement of Financial Accounting Standards No. 123, "Accounting for
      Stock-Based Compensation" (FAS 123). FAS 123 indicates that the fair value
      method is the preferable method of accounting. The Company expects to
      adopt the fair value method prospectively to awards granted or modified
      after January 1, 2003 as currently required by FAS 123. The Company does
      not expect the impact of adopting FAS 123 to be significant in 2003.

      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.


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

5.    Segment Information

<TABLE>
<CAPTION>
                                                                    TOTAL
(at and for the three months       COMMERCIAL      PERSONAL       REPORTABLE
ended September 30, in millions)     LINES          LINES          SEGMENTS
--------------------------------     -----          -----          --------
<S>                               <C>             <C>             <C>
2002
Revenues
   Premiums                        $ 1,757.8       $ 1,117.5       $ 2,875.3
   Net investment income               357.8            83.4           441.2
   Fee income                          118.6              --           118.6
   Realized investment losses          (34.3)          (17.1)          (51.4)
   Other revenues                      160.9            19.6           180.5
                                   ---------       ---------       ---------
     Total revenues                $ 2,360.8       $ 1,203.4       $ 3,564.2
                                   =========       =========       =========
Operating income (1)               $   294.7       $    92.0       $   386.7
Assets                              50,325.0         9,026.7        59,351.7
                                   =========       =========       =========
2001
Revenues
   Premiums                        $ 1,310.8       $ 1,003.4       $ 2,314.2
   Net investment income               382.1            95.9           478.0
   Fee income                           93.2              --            93.2
   Realized investment gains            89.2             9.1            98.3
   Other revenues                        3.3            17.4            20.7
                                   ---------       ---------       ---------
     Total revenues                $ 1,878.6       $ 1,125.8       $ 3,004.4
                                   =========       =========       =========
Operating income (loss) (1)        $  (132.0)      $    34.8       $   (97.2)
Assets                              46,897.6         8,530.3        55,427.9
                                   =========       =========       =========
</TABLE>

(1)   Operating income (loss) excludes realized investment gains (losses) and
      restructuring charges and is reflected net of tax and minority interest.


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

5.    Segment Information, Continued

<TABLE>
<CAPTION>
                                                                              TOTAL
(at and for the nine months ended          COMMERCIAL       PERSONAL        REPORTABLE
September 30, in millions)                   LINES           LINES           SEGMENTS
--------------------------                   -----           -----           --------
<S>                                        <C>             <C>              <C>
2002
Revenues
   Premiums                                $  5,000.8      $  3,215.8       $  8,216.6
   Net investment income                      1,109.9           283.0          1,392.9
   Fee income                                   330.1              --            330.1
   Realized investment gains (losses)            15.5           (74.4)           (58.9)
   Other revenues                               174.8            59.9            234.7
                                           ----------      ----------       ----------
     Total revenues                        $  6,631.1      $  3,484.3       $ 10,115.4
                                           ==========      ==========       ==========

Operating income (1)                       $    882.8      $    233.2       $  1,116.0
Assets                                       50,325.0         9,026.7         59,351.7
                                           ==========      ==========       ==========

2001
Revenues
   Premiums                                $  3,911.8      $  2,925.1       $  6,836.9
   Net investment income                      1,215.7           312.8          1,528.5
   Fee income                                   254.8              --            254.8
   Realized investment gains                    314.6            25.3            339.9
   Other revenues                                34.3            53.8             88.1
                                           ----------      ----------       ----------
     Total revenues                        $  5,731.2      $  3,317.0       $  9,048.2
                                           ==========      ==========       ==========

Operating income(1)                        $    471.2      $    180.9       $    652.1
Assets                                       46,897.6         8,530.3         55,427.9
                                           ==========      ==========       ==========
</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 and minority interest.


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

5.    Segment Information, Continued

     BUSINESS SEGMENT RECONCILIATION

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                  SEPTEMBER 30,                 SEPTEMBER 30,
                                                                  -------------                 -------------
(in millions)                                                  2002           2001           2002           2001
-------------                                                  ----           ----           ----           ----
<S>                                                          <C>            <C>            <C>            <C>
INCOME RECONCILIATION, NET OF TAX AND MINORITY INTEREST
Total operating income (loss) for reportable segments        $  386.7       $  (97.2)      $1,116.0       $  652.1
Other operating loss (1)                                        (26.6)         (24.5)         (72.5)        (110.7)
Realized investment gains (losses)                              (27.8)          62.6          (32.9)         220.1
Restructuring charges                                              --           (0.8)          (1.6)          (2.6)
Cumulative effect of changes in accounting for:
 Goodwill and other intangible assets, net of tax                  --             --         (242.6)            --
 Derivative instruments and hedging activities                     --             --             --            4.5
 Securitized financial assets                                      --             --             --           (1.3)
                                                             --------       --------       --------       --------
Total consolidated net income (loss)                         $  332.3       $  (59.9)      $  766.4       $  762.1
                                                             ========       ========       ========       ========
</TABLE>

      (1)   The primary component of the other operating loss is after-tax
            interest expense of $25.5 million and $30.2 million for the three
            months ended September 30, 2002 and 2001, respectively, and $73.9
            million and $107.1 million for the nine months ended September 30,
            2002 and 2001, respectively.

6.    Changes in Equity from Nonowner Sources

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

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED           NINE MONTHS ENDED
                                                         SEPTEMBER 30,                SEPTEMBER 30,
                                                         -------------                -------------
(in millions)                                         2002          2001           2002          2001
-------------                                         ----          ----           ----          ----
<S>                                                 <C>           <C>            <C>           <C>
Net income (loss)                                   $  332.3      $  (59.9)      $  766.4      $  762.1
Net unrealized gain on securities                      536.5         193.7          657.1         116.5
Other (1)                                                6.2           2.8           16.6           1.5
Cumulative effect of changes in accounting for
 derivative instruments and hedging activities            --            --             --          (4.0)
                                                    --------      --------       --------      --------
 Total changes in equity from nonowner sources      $  875.0      $  136.6       $1,440.1      $  876.1
                                                    ========      ========       ========      ========
</TABLE>

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

7.    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. The computation of diluted EPS reflects the effect of potentially
      dilutive securities, principally the incremental shares which are assumed
      to be issued under the Company's 2002 Incentive Plan (see note 9).
      Excluded from the computation of diluted EPS were 39 million of
      potentially dilutive shares related to convertible junior subordinated
      notes (see note 8) 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 nine months ended September 30, 2002 and
      2001, there was no significant effect on EPS from potentially dilutive
      securities.


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

8.    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 $500.0 million line of credit agreement (the line of credit)
      with a Citigroup affiliated company. The line of credit expires in
      December 2006. At September 30, 2002, TIGHI had $500.0 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 $250.0 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 September 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
      cash available at TPC and TIGHI.

      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 $150.0
      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 $395.0 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 $4.274 billion.

      In March 2002, TPC issued $892.5 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.


                                       18
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

8.    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.

      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 $150.0 million 6.75% Notes due 2006 and the $200.0 million
      7.75% Notes due 2026 included in long-term debt and the $900.0 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.

      In August 2002, Commercial Insurance Resources, Inc. (CIRI), a subsidiary
      of the Company, issued $49.7 million aggregate principal amount of 6.0%
      convertible notes (the CIRI Notes) which will mature on December 31, 2032
      unless earlier redeemed or repurchased (see note 11). Interest on the CIRI
      Notes is payable quarterly in arrears. The CIRI Notes are convertible as a
      whole and not in part into shares of CIRI common stock at the option of
      the holders of 66-2/3% of the aggregate principal amount of the notes, in
      the event of an Initial Public Offering (IPO) or change of control of
      CIRI. At any time after the earlier of (a) December 31, 2010 or (b) an IPO
      by CIRI, the notes may be redeemed by CIRI.

      CIRI also issued $85.9 million of mandatory convertible preferred stock
      during August 2002 (see note 11). The declaration and payment of dividends
      to holders of CIRI's convertible preferred stock will be at the discretion
      of the CIRI Board of Directors and if declared, paid on a cumulative basis
      for each share of convertible preferred stock at an annual rate of 6% of
      the stated value per share of the convertible preferred stock. Dividends
      of $862 thousand were declared and paid during the quarter ended September
      30, 2002.


                                       19
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

8.    Capital and Debt, Continued

      During September 2002, the Board of Directors approved a $500.0 million
      share repurchase program. Purchases of class A and class B stock may be
      made from time to time over the subsequent two years in the open market,
      and it is expected that funding for the program will principally come from
      operating cash flow. Shares repurchased will be authorized and unissued
      and are reported as treasury stock in the consolidated balance sheet.

      TPC's insurance subsidiaries are subject to various regulatory
      restrictions that limit the maximum amount of dividends that can be paid
      to their parent without prior approval of insurance regulatory
      authorities. TPC's insurance subsidiaries paid dividends of $825.0 million
      to TIGHI during the first nine months of 2002. Any dividends to be paid
      during the remainder of 2002 may be subject to approval by the Connecticut
      Insurance Department.

9.    Stock Incentive Plans

      The Company's Board of Directors, in connection with the March 2002 IPO,
      adopted the Travelers Property Casualty Corp. 2002 Stock Incentive Plan
      (the 2002 Incentive Plan). The plan permits grants of stock options,
      restricted stock and other stock-based awards. The purposes of the plan
      are to attract and retain employees by providing compensation
      opportunities that are competitive with other companies, provide
      incentives to those employees who contribute significantly to the
      Company's long-term performance and growth, and align employees' long-
      term financial interest with those of the Company's stockholders. The
      maximum number of shares of class A and class B common stock that may be
      issued pursuant to awards granted under the plan is 160.0 million shares.

      The Company's Board of Directors, in connection with the March 2002 IPO,
      also adopted the Travelers Property Casualty Corp. Compensation Plan for
      Non-Employee Directors (Directors Plan). Under the directors plan, the
      directors receive their annual fees in the form of Company common stock.
      Each director may choose to receive a portion of their fees in cash to pay
      taxes. Directors may also defer receipt of shares of class A common stock
      to a future distribution date or upon termination of their service. The
      shares of class A common stock issued under the Directors Plan come from
      the 2002 Incentive Plan.

      Stock Option Programs

      The Company has established several stock option programs pursuant to the
      2002 Incentive Plan: the Management stock option program and the
      Wealthbuilder stock option program (see also Restricted Stock Program
      below). The Management stock option program provides for the granting of
      stock options to officers and key employees of the Company and its
      participating subsidiaries. The Wealthbuilder stock option program
      provides for the granting of stock options to all employees meeting
      certain requirements. The exercise price of options is equal to the fair
      market value of the Company's class A common stock at the time of grant.
      Generally, options may be exercised for a period of ten years from the
      date of grant, and vest 20% each year over a five-year period and are
      exercisable only if the optionee is employed by the Company, and for
      certain periods after employment termination, depending on the cause of
      termination. The Management stock option program also permits an employee
      exercising an option to be granted a new option (a reload option) in an
      amount equal to the number of shares of class A common stock used to
      satisfy the exercise price and withholding taxes due upon exercise of an
      option. The reload options are granted at an exercise price equal to the
      fair market value of the class A common stock on the date of grant, are
      exercisable for the remaining term of the related original option, and
      vest six months after the grant date. The Wealthbuilder stock option
      program does not contain a reload feature.


                                       20
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

9.    Stock Incentive Plans, Continued

      Restricted Stock Program

      The Company, through its Capital Accumulation Program (CAP) established
      pursuant to the 2002 Incentive Plan, issues shares of the Company's common
      stock in the form of restricted stock awards to eligible officers and key
      employees. Certain CAP participants may elect to receive part of their
      awards in restricted stock and part in stock options. The number of shares
      included in the restricted stock award are calculated at a 25% discount
      from the market price at the time of the award and generally vest in full
      after a three-year period. Except under limited circumstances, during this
      period the stock cannot be sold or transferred by the participant, who is
      required to render service to the Company during the restricted period.
      Unearned compensation expense associated with the restricted stock grants
      represents the market value of the Company's common stock at the grant
      date and is recognized as a charge to income ratably over the vesting
      period.

10.   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.

      In establishing environmental reserves, the Company evaluates the exposure
      presented by each insured and the anticipated cost of resolution, if any,
      for each insured on a quarterly basis. In the course of this analysis, the
      Company considers the probable liability, available coverage, relevant
      judicial interpretations and historical value of similar exposures. In
      addition, the Company considers the many variables presented, such as the
      nature of the alleged activities of the insured at each site; the
      allegations of environmental harm at each site; the number of sites; the
      total number of potentially responsible parties at each site; the nature
      of environmental harm and the corresponding remedy at each site; the
      nature of government enforcement activities at each site; the ownership
      and general use of each site; the overall nature of the insurance
      relationship between the Company and the insured, including the role of
      any umbrella or excess insurance the Company has issued to the insured;
      the involvement of other insurers; the potential for other available
      coverage, including the number of years of coverage; the role, if any, of
      non-environmental claims or potential non-environmental claims, in any
      resolution process; and the applicable law in each jurisdiction.


                                       21
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

10.   Commitments and Contingencies, Continued

      Because each insured presents different liability and coverage issues, the
      Company evaluates the asbestos-related 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.

      With respect to its asbestos exposures, 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 and
      applicability of the result derived from the division of the ending direct
      and net reserves by prior period direct and net paid activity, also known
      as the survival ratio. Losses paid, both direct and ceded, have increased
      in the first nine months of 2002 compared to the first nine months of
      2001. 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, including
      those from prior settlements of coverage disputes entered into between the
      Company and certain of its policyholders. For the first nine months of
      2002 approximately 60% of total paid losses relate to policyholders with
      whom the Company previously entered into settlement agreements that limit
      the Company's liability.

      As a result of the processes and procedures described above, management
      believes that the reserves carried for environmental and asbestos claims
      at September 30, 2002 are appropriately established based upon known
      facts, current law and management's judgment. 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 difficult to predict the ultimate outcome of
      large 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.


                                       22
<PAGE>

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

10.   Commitments and Contingencies, Continued

      As part of a periodic, ground-up study of asbestos reserves, which is in
      process, the Company continues to study the implications of these and
      other significant developments, with special attention to major asbestos
      defendants and non-products claims alleging that the Company's coverage
      obligations are not subject to aggregate limits.

      Because of the uncertainties set forth above, additional liabilities may
      arise for amounts in excess of the current related reserves. In addition,
      the Company's estimate of ultimate claims and claim adjustment expenses
      may change. These additional liabilities or increases in estimates, or a
      range of either, cannot now be reasonably estimated and could result in
      income statement charges that could be material to the Company's operating
      results and financial condition in future periods. In March 2002,
      Citigroup entered into an agreement under which it will provide the
      Company with 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 $150.0 million, net
      of any reinsurance, up to a cumulative aggregate of $800.0 million,
      reduced by the tax effect of the highest applicable federal income tax
      rate. During the quarter ended September 30, 2002, the Company recorded
      $245.0 million of asbestos incurred losses, net of reinsurance, in excess
      of the annual deductible. After the current quarter charge, $555.0 million
      of future recoveries (including tax benefits) remains available under this
      agreement.

      In August 2002, the Company entered into an agreement with Shook &
      Fletcher Insulation Co. (Shook) settling coverage litigation under
      insurance policies which the Company issued to Shook. Prior to entering
      into the settlement, Shook had filed a voluntary petition for bankruptcy.
      In October 2002, the bankruptcy court issued an order approving the
      settlement with the Company. This settlement is valued at approximately
      $78.0 million (after reinsurance, tax and discounting). The settlement is
      subject to customary contingencies, including final court approval. The
      Company is fully reserved as of September 30, 2002 for its payment
      obligations under the settlement agreement.

      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 to occur. 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 $240.0 million
      (after tax and discounting) and would be covered by reserves and
      additional charges that would be taken if the settlement agreement is
      finalized and other settlement contingencies are met.

      In the ordinary course of business, the Company is a defendant or
      codefendant in various litigation matters in addition to those related to
      asbestos. Although there can be no assurances, as of September 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.


                                       23
<PAGE>
               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

11.   Commercial Insurance Resources, Inc.

      On August 1, 2002, Commercial Insurance Resources, Inc. (CIRI), a
      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 $85.9 million of mandatory
      convertible preferred stock, $49.7 million of convertible notes and $3.6
      million of common equity, representing a 24% ownership interest, on a
      fully diluted basis. The dividend rate on the preferred stock is 6.0%. The
      interest rate on the notes is 6.0% 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 $125.0 million, and a group of approximately 75 senior employees
      of Gulf invested $14.2 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's results are included in the Commercial Lines segment.

12.   Acquisitions

      On October 1, 2001, the Company paid $329.5 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 $356.5
      million, was contributed to the Company by Citigroup.


                                       24
<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 269.0 million shares of class A common stock and 500.0
      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 231.0 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 500.0 million
shares of TPC's outstanding class B common stock, each share of which is
entitled to seven votes, and 269.0 million shares of TPC's class A common stock,
each share of which is entitled to one vote, representing at the time 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 $892.5 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 $1.000 billion, $3.700 billion and $395.0 million,
aggregating $5.095 billion, which were each in the form of notes payable. The
proceeds of the offerings were used to prepay the $395.0 million note and
substantially prepay the $3.700 billion note.


                                       25
<PAGE>
CITIGROUP DISTRIBUTION OF OWNERSHIP INTEREST IN TPC

On August 20, 2002, Citigroup made a tax-free distribution to its stockholders
(the Citigroup Distribution), of a portion of its ownership interest in TPC,
which, together with the shares issued in the IPO, represented more than 90% of
TPC's common equity and more than 90% of the combined voting power of TPC's
outstanding voting securities. For each 100 shares of Citigroup outstanding
common stock approximately 4.32 shares of TPC class A common stock and 8.88
shares of TPC class B common stock were distributed. At September 30, 2002,
Citigroup was a holder of 9.96% of TPC's common equity and 9.98% of the combined
voting power of TPC's outstanding voting securities. Citigroup received a
private letter ruling from the Internal Revenue Service that the Citigroup
Distribution is 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 Citigroup Distribution pro rata with the shares held by the public
and to divest the remaining shares it holds within five years following the
Citigroup Distribution.

On August 20, 2002, in connection with the Citigroup Distribution, stock-based
awards held by Company employees on that date under Citigroup's various
incentive plans were cancelled and replaced by awards under the Company's own
incentive programs (see note 9), which awards were granted on substantially the
same terms, including vesting, as the former Citigroup awards. In the case of
Citigroup Capital Accumulation Plan awards of restricted stock and deferred
shares, the unvested outstanding awards were cancelled and replaced by awards
comprising 3.1 million of newly issued shares of TPC class A common stock at a
total market value of $53.3 million based on the closing price of TPC class A
common stock on August 20, 2002. The value of these newly issued shares along
with TPC class A and class B common stock received in the Citigroup Distribution
on the Citigroup restricted shares, were equal to the value of the cancelled
Citigroup restricted share awards. In the case of Citigroup stock option awards,
all outstanding vested and unvested awards held by Company employees were
cancelled and replaced with options to purchase TPC class A common stock. The
total number of TPC class A common stock subject to the replacement option
awards was 56.9 million shares of which 24.6 million were then exercisable. The
number of shares of TPC class A common stock to which the replacement options
relates and the per share exercise price of the replacement options were
determined so that:

-     The intrinsic value of each Citigroup option, which was the difference
      between the closing price of Citigroup's common stock on August 20, 2002
      and the exercise price of the Citigroup options, was preserved in each
      replacement option for TPC class A common stock.

-     The ratio of the exercise price of the replacement option to the closing
      price of TPC class A common stock on August 20, 2002, immediately after
      the Citigroup Distribution, was the same as the ratio of the exercise
      price of the Citigroup option to the price of Citigroup common stock
      immediately before the Citigroup Distribution.

OTHER TRANSACTIONS

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

In February 2002, the Company paid a dividend of $1.000 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 cash currently available at
TPC and TIGHI.

In February 2002, the Company also paid a dividend of $3.700 billion to
Citigroup in the form of a note payable in two installments. This note was
substantially prepaid following the offerings. The balance of $150.0 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 $395.0 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.


                                       26
<PAGE>
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 $150.0 million, net of any reinsurance,
Citigroup will pay to the Company the amount of any such excess up to a
cumulative aggregate of $800.0 million, reduced by the tax effect of the highest
applicable federal income tax rate. In the third quarter of 2002, the Company
incurred asbestos-related income statement charges, net of reinsurance, of
$245.0 million in excess of the annual $150.0 million deductible. Included in
other revenues is $159.3 million related to the benefit recoverable from
Citigroup under the indemnification agreement which represents the $245.0
million charge in excess of the $150.0 million deductible, reduced by the
related tax benefit provided. Included in federal income taxes in the condensed
consolidated statement of income is a tax benefit of $85.7 million related to
the asbestos charge. At September 30, 2002, $555.0 million remains available,
including applicable tax benefits, under the agreement. For additional
information see " - Asbestos Claims".

On February 28, 2002, the Company sold CitiInsurance to other Citigroup
affiliated companies for $402.6 million, its net book value. The Company has
applied $137.8 million of the proceeds from this sale to repay intercompany
indebtedness to Citigroup. In addition, the Company purchased from Citigroup
affiliated companies the premises located at One Tower Square, Hartford,
Connecticut and other properties for $68.2 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 $172.4 million and $87.8 million,
respectively, to Citigroup affiliated companies.

Prior to the Citigroup Distribution, the Company provided and purchased services
to and from Citigroup affiliated companies, including facilities management,
banking and financial functions, benefit coverages, data processing services,
and short-term investment pool management services. Charges for these shared
services were allocated at cost. In connection with the Citigroup Distribution,
the Company and Citigroup and its affiliates entered into a transition services
agreement for the provision of these services, tradename and trademark and
similar agreements related to the use of trademarks, logos and tradenames and 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. On August 6, 2002, the
Company entered into an investment management agreement, which has been applied
retroactive to April 1, 2002, with an affiliate of Citigroup whereby the
affiliate of Citigroup is providing investment advisory and administrative
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. Charges incurred related to this agreement were $28.1
million for the period from April 1, 2002 though September 30, 2002. Either
party may terminate the agreement effective on or after March 31, 2003 upon 90
days prior notice. The Company and Citigroup also agreed upon the allocation or
transfer of certain other liabilities and assets, and rights and obligations in
furtherance of the separation of operations and ownership as a result of the
Citigroup Distribution. The net effect of these allocations and transfers, in
the opinion of management, were not significant to the Company's results of
operations or financial condition.


                                       27
<PAGE>
On August 1, 2002, Commercial Insurance Resources, Inc. (CIRI), a 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 $85.9 million of mandatory convertible preferred stock, $49.7
million of convertible notes and $3.6 million of common equity, representing a
24% ownership interest of CIRI, on a fully diluted basis. The dividend rate on
the preferred stock is 6.0%. The interest rate on the notes is 6.0% 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 $125.0 million, and a group of approximately 75 senior employees' of
Gulf invested $14.2 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 $329.5 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 $356.5
million, was contributed to the Company by Citigroup. These companies are
principally engaged in Commercial Lines specialty and transportation business.

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.


<TABLE>
<CAPTION>
CONSOLIDATED RESULTS OF OPERATIONS                              THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                   SEPTEMBER 30,                     SEPTEMBER 30,
                                                                   -------------                     -------------
(in millions, except per share data)                           2002             2001             2002             2001
------------------------------------                           ----             ----             ----             ----
<S>                                                         <C>              <C>              <C>              <C>
Revenues                                                    $  3,563.9       $  3,012.5       $ 10,116.4       $  9,053.6
                                                            ----------       ----------       ----------       ----------

Income (loss) before cumulative effect of changes
  in accounting principles and minority interest            $    333.6       $    (59.9)      $  1,010.3       $    758.9
Minority interest, net of tax                                     (1.3)              --             (1.3)              --
Cumulative effect of changes in accounting principles,
  net of tax                                                        --               --           (242.6)             3.2
                                                            ----------       ----------       ----------       ----------
Net income (loss)                                           $    332.3       $    (59.9)      $    766.4       $    762.1
                                                            ==========       ==========       ==========       ==========

                                                            ----------       ----------       ----------       ----------
Basic and diluted earnings per share
                                                            ----------       ----------       ----------       ----------

Income (loss) before cumulative effect of changes
  in accounting principles and minority interest            $     0.33       $    (0.08)      $     1.08       $     0.99
Minority interest, net of tax                                       --               --               --               --
Cumulative effect of changes in accounting principles               --               --            (0.26)              --
                                                            ----------       ----------       ----------       ----------
Net income (loss)                                           $     0.33       $    (0.08)      $     0.82       $     0.99
                                                            ----------       ----------       ----------       ----------
Weighted average number of common shares outstanding
  (basic)                                                      1,000.0            769.0            932.3            769.0
                                                            ----------       ----------       ----------       ----------
Weighted average number of common shares outstanding
  and common stock equivalents (diluted)                       1,002.0            769.0            933.0            769.0
                                                            ----------       ----------       ----------       ----------
</TABLE>


                                       28
<PAGE>
The Company's discussions related to net income and operating income are
presented on an after tax basis. All other discussions are presented on a pretax
basis, unless otherwise noted.

Net income (loss) was $332.3 million and $766.4 million in the 2002 third
quarter and nine months, respectively, compared to $(59.9) million and $762.1
million in the comparable periods of 2001. Net income for the 2001 third quarter
and nine months includes losses of $489.5 million related to the terrorist
attack on September 11, 2001. Net income included $27.8 million and $32.9
million of realized investment losses in the 2002 third quarter and nine months,
respectively, compared to $62.6 million and $220.1 million of realized
investment gains in the comparable periods of 2001. Net income for the nine
months of 2002 included a charge of $242.6 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.

Operating income (loss), which excludes realized investment gains and losses,
restructuring charges, the cumulative effect of the changes in accounting
principles and minority interest in 2002, was $360.1 million and $1.044 billion,
or $0.36 per share and $1.12 per share (basic and diluted), in the 2002 third
quarter and nine months, respectively, compared to $(121.7) million and $541.4
million, or $(0.16) per share and $0.70 per share (basic and diluted), in the
comparable periods of 2001. Excluding the impact of the effect of September
11th, operating income for the 2001 third quarter and nine month period would
have been $367.8 million and $1.031 billion, respectively.

The 2002 third quarter operating income of $360.1 million decreased $7.7 million
compared to $367.8 million for the 2001 comparable period, excluding the impact
of September 11th. Impacting operating income was unfavorable prior-year reserve
development in the 2002 third quarter of $209.2 million, which included $191.0
million related to asbestos, versus $6.2 million of favorable prior-year reserve
development in the prior year quarter, which included $24.4 million of
unfavorable development related to asbestos. The increase in asbestos-related
reserves is based on the Company's analysis of trends in reported losses, higher
levels of claim payments, the current litigation environment and settlement
activities. As part of a periodic, ground-up study of asbestos reserves, which
is in process, the Company continues to study the implications of these and
other significant developments with special attention to major asbestos
defendants and non-products claims alleging that the Company's coverage
obligations are not subject to aggregate limits. The Company expects to complete
this analysis during the 2002 fourth quarter. This was largely offset by a
benefit of $159.3 million, included in other revenues, related to recoveries
under the Citigroup indemnification agreement. Despite strong cash flows from
operations, net investment income of $331.9 million was $27.3 million lower than
the prior year period due to reduced returns in the Company's alternative
investments portfolio which comprises primarily private, public and real estate
equity investments, and the lower interest rate environment. The 2002 third
quarter was also unfavorably impacted by higher weather related catastrophe
losses. Significantly benefiting 2002 third quarter operating income was the
favorable premium rate environment, higher production levels, the elimination of
goodwill amortization, lower interest expense and disciplined expense
management.


                                       29
<PAGE>
The 2002 nine months operating income reflects similar trends to the 2002 third
quarter results. Operating income of $1.044 billion for the 2002 nine months
increased $12.6 million compared to $1.031 billion for the 2001 comparable nine
months, excluding the impact of September 11th. Operating income in the 2002
nine months included unfavorable prior-year reserve development of $336.6
million, which included $256.8 million related to asbestos, versus $34.6 million
of favorable prior-year reserve development in the prior year period, which
included $73.8 million of unfavorable development related to asbestos. This was
offset by a benefit of $159.3 million, included in other revenues, related to
recoveries under the Citigroup indemnification agreement. The 2002 nine months
net investment income of $1.039 billion was down $84.5 million compared to
$1.124 billion in the 2001 nine months, reflecting similar trends to the third
quarter. Significantly offsetting the above for the nine months of 2002 was the
favorable premium rate environment, lower weather related catastrophe losses of
$35.8 million in the 2002 nine months compared to $62.8 million of weather
related catastrophe losses in the prior year period, the elimination of goodwill
amortization, lower interest expense, and disciplined expense management.

Revenues of $3.564 billion and $10.116 billion in the 2002 third quarter and
nine months, respectively, increased $551.4 million and $1.063 billion from the
comparable periods of 2001. The increases were primarily attributable to the
inclusion of Northland and Associates in the 2002 third quarter and nine months,
the $159.3 million benefit of the Citigroup indemnification agreement, which is
included in other revenues, and premium 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 third quarter and nine months were $276.6 million and $794.1 million,
respectively. The increase in the 2002 third quarter revenue reflects a $561.1
million increase in earned premiums, offset by $51.3 million of realized
investment losses in the third quarter of 2002 compared to $96.3 million of
realized investment gains in the third quarter of 2001 and a $47.4 million
decrease in net investment income. The increase in the 2002 nine months revenue
reflects a $1.380 billion increase in earned premiums, offset by $58.5 million
of realized investment losses in the 2002 nine month period compared to $337.9
million of realized investment gains in the 2001 nine month period and a $141.9
million decrease in net investment income. Realized investment losses include
$34.7 million and $223.6 million of impairments in the 2002 third quarter and
nine months, respectively, compared to $18.8 million and $45.4 million in the
comparable periods of 2001. Included in the 2002 nine months impairments was a
$71.6 million write down of the fair value of the Company's investments in
WorldCom bonds, from $83.5 million to $11.9 million.

Earned premiums increased $561.1 million and $1.380 billion to $2.875 billion
and $8.217 billion in the 2002 third quarter and nine months, respectively, from
$2.314 billion and $6.837 billion in the comparable periods of 2001. The
increase in earned premiums in the 2002 third quarter and nine months was due to
the inclusion of Northland and Associates in the third quarter and nine 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
third quarter and nine months were $261.1 million and $723.7 million,
respectively.

Net investment income was $440.7 million and $1.393 billion in the 2002 third
quarter and nine months, respectively, a decrease of $47.4 million and $141.9
million from the comparable periods of 2001. The declines resulted from a
reduction in after-tax investment yields to 4.0% and 4.3% in the 2002 third
quarter and nine months, respectively, from 4.8% and 5.1% in the 2001 comparable
periods. The decrease in after-tax yields reflected reduced returns in the
Company's alternative investment portfolio and the lower interest rate
environment. 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.


                                       30
<PAGE>

Fee income was $118.6 million and $330.1 million in the 2002 third quarter and
nine months, respectively, a $25.4 million and $75.3 million increase from the
comparable periods of 2001. National Accounts within Commercial Lines is the
primary source of fee income due to its service businesses, which include claim
and loss prevention services to large companies that choose to self insure a
portion of their insurance risks and claims and policy management services to
workers' compensation and automobile assigned risk plans and to self insurance
pools. The increases in fee income were primarily due to the favorable rate
environment and the repopulation of the involuntary pools. Claim volume under
administration increased to $549.8 million and $2.016 billion for the 2002 third
quarter and nine months, respectively, compared to $414.0 million and $1.659
billion for the comparable periods in 2001.

Other revenues increased to $180.6 million and $234.9 million in the 2002 third
quarter and nine months, respectively, from $20.7 million and $88.8 million in
the comparable periods of 2001. The increases in other revenues primarily
reflects a benefit of $159.3 million related to recoveries under the Citigroup
indemnification agreement.

Claims and expenses of $3.224 billion and $8.887 billion in the 2002 third
quarter and nine months, respectively, increased $59.2 million and $819.0
million from $3.165 billion and $8.068 billion in the comparable periods of
2001. The 2002 increases were primarily due to the inclusion in 2002 of
Northland and Associates, changes in prior-year reserve development and
increased loss cost trends, partially offset by the $704.0 million impact in
2001 of the terrorist attack on September 11th. The inclusion of Northland and
Associates in the 2002 third quarter and nine months added $350.0 million and
$858.3 million, respectively, to claims and expenses. Also impacting the
increase in claims and expenses was the impact of unfavorable prior year reserve
development in 2002 of $321.8 million and $517.9 million, for the third quarter
and nine months, respectively, compared to 2001 favorable prior year reserve
development of $9.6 million and $53.2 million, respectively. The most
significant component of prior-year reserve development in the 2002 third
quarter and nine months was asbestos-related incurrals of $293.8 million and
$395.0 million for the 2002 third quarter and nine months, which increased
$256.2 million and $281.5 million, respectively, over 2001 comparable periods.
This increase in asbestos-related reserves is based on the Company's analysis of
trends in reported losses, higher levels of claim payments, the current
litigation environment and settlement activities. For additional information see
" - Asbestos Claims." These increases were also partially offset by the benefit
of a reduction in the estimated 2002 accident year loss ratio, primarily in
automobile due to greater than expected moderation in loss cost trends, lower
interest expense, the elimination of goodwill amortization, underwriting
discipline and expense management.

The Company's effective federal tax rate was 2% and 18% in the 2002 third
quarter and nine months, compared to (61)% and 23% in the comparable periods of
2001. The effective tax rates for the 2002 periods reflect the impact of
non-taxable recoveries of $159.3 million related to the indemnification
agreement with Citigroup and non-taxable investment income. The effective tax
rates for the 2001 periods reflect the impact of losses associated with the
terrorist attack on September 11th, which changed the mix of taxable and
non-taxable income or loss.

                                       31
<PAGE>
The statutory and GAAP combined ratios were as follows:

<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED             NINE MONTHS ENDED
                                                 SEPTEMBER 30,                  SEPTEMBER 30,
                                                 -------------                  -------------
                                                          ADJUSTED(1)                         ADJUSTED(1)
                                       2002      2001        2001        2002        2001        2001
=========================================================================================================
<S>                                   <C>        <C>      <C>            <C>        <C>       <C>
STATUTORY:
    Loss and Loss Adjustment
       Expense (LAE ratio)             81.0%     102.9%      70.9%        76.9%      83.1%       72.3%
    Underwriting expense ratio         25.3       27.5       27.0         25.4       27.4        27.3
    Combined ratio before
       policyholder dividends         106.3      130.4       97.9        102.3      110.5        99.6
    Combined ratio                    106.4      130.7       98.2        102.4      110.8        99.9
---------------------------------------------------------------------------------------------------------
GAAP:
    Loss and LAE ratio                 71.8%     102.7%      70.7%        73.4%      82.9%       72.1%
    Underwriting expense ratio         26.1       27.7       27.2         26.2       28.5        28.3
    Combined ratio before
       policyholder dividends          97.9      130.4       97.9         99.6      111.4       100.4
    Combined ratio                     98.0      130.7       98.2         99.7      111.7       100.7
=========================================================================================================
</TABLE>

(1)   Adjusted 2001 ratios exclude the effect of the terrorist attack on
      September 11, 2001.

GAAP combined ratios differ from statutory combined ratios primarily due to the
exclusion of asbestos-related losses subject to recoverability under the
Citigroup indemnification agreement for GAAP ratio computation purposes only.
The Citigroup indemnification agreement is between TPC (a non insurance company)
and Citigroup and therefore does not impact statutory results. GAAP combined
ratios also differ from statutory combined ratios due to the deferral and
amortization of certain expenses for GAAP reporting purposes only. Commencing in
the third quarter of 2002, the GAAP underwriting expense ratio has been computed
using net earned premiums. Previously, this ratio for GAAP purposes was computed
using net written premiums. Prior periods have been restated to conform to this
new presentation.

The 2002 third quarter and nine month statutory combined ratios include the
$245.0 million of asbestos-related losses subject to the indemnification
agreement with Citigroup that added 8.5 points and 3.0 points to both the
statutory loss and loss adjustment expense ratio and the statutory combined
ratio for the 2002 third quarter and nine months, respectively.

Although the 2002 third quarter GAAP combined ratio before policyholder
dividends was level compared to the 2001 third quarter, excluding the impact of
the terrorist attack on September 11th, it reflects an increase in the loss and
loss adjustment expense ratio offset by an improvement in the underwriting
expense ratio. The increase in the loss and loss adjustment expense ratio is
primarily due to unfavorable prior-year reserve development in the 2002 third
quarter compared to favorable prior-year reserve development in the prior year
quarter. To a lesser degree, 2002 was impacted by weather related catastrophe
losses compared to no natural catastrophes in the prior year quarter. Offsetting
this was the benefit of the favorable premium rate environment as well as
targeted changes in the Company's business mix. The improvement in the
underwriting expense ratio is primarily attributed to the elimination of
goodwill amortization and the benefit of premium rate increases, partially
offset by higher contingent commission expense in the 2002 third quarter due to
improved underwriting results and a nonrecurring expense benefit in the prior
year quarter.

                                       32
<PAGE>
The improvement in the 2002 nine month GAAP combined ratios before policyholder
dividends compared to the 2001 nine month period, excluding the impact of the
terrorist attack on September 11th, reflects an increase in the loss and loss
adjustment expense ratio partially offset by an improvement in the underwriting
expense ratio. The increase in the loss and loss adjustment expense ratio is
primarily attributed to unfavorable prior-year reserve development in the 2002
nine months compared to a favorable prior-year reserve development in the prior
year period. Offsetting this was the benefit of the favorable premium rate
environment as well as targeted changes in the Company's business mix, and lower
weather related catastrophe losses in the 2002 nine months compared to the prior
year period. The improvement in the underwriting expense ratio reflects similar
trends to the 2002 third quarter ratio, including an improvement from the
elimination of goodwill amortization.

SEGMENT RESULTS

COMMERCIAL LINES

<TABLE>
<CAPTION>
=============================================================================================================
                                                              THREE MONTHS ENDED          NINE MONTHS ENDED
                                                                  SEPTEMBER 30,             SEPTEMBER 30,
(in millions)                                                 2002          2001          2002          2001
=============================================================================================================
<S>                                                         <C>          <C>           <C>           <C>
Revenues                                                    $2,360.8     $ 1,878.6     $ 6,631.1     $5,731.2
-------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of changes
    in accounting principles and minority interest          $  273.5     $   (74.0)    $   894.3     $  676.1
Minority interest, net of tax                                   (1.3)           --          (1.3)        --
Cumulative effect of changes in accounting principles,
    net of tax                                                    --            --        (242.6)         2.7
-------------------------------------------------------------------------------------------------------------
Net income (loss)                                           $  272.2     $   (74.0)    $   650.4     $  678.8
=============================================================================================================
</TABLE>

Net income (loss) was $272.2 million and $650.4 million in the 2002 third
quarter and nine months, respectively, compared to $(74.0) million and $678.8
million in the comparable periods of 2001. The 2001 quarter and nine months
include a net loss of $447.9 million related to the terrorist attack on
September 11, 2001. Commercial Lines net income included $22.5 million of
realized investment losses and $10.2 million of realized investment gains in the
2002 third quarter and nine months, respectively, compared to $58.0 million and
$204.9 million of realized investment gains in the comparable periods of 2001.
Net income for the 2002 nine months included a charge of $242.6 million related
to the initial adoption of FAS 142, which has been accounted for as a cumulative
effect of a change in accounting principle.

Commercial Lines operating income (loss), which excludes realized investment
gains and losses, the cumulative effect of the changes in accounting principles
described above and minority interest in 2002, was $294.7 million and $882.8
million in the 2002 third quarter and nine months, respectively, compared to
$(132.0) million and $471.2 million in the comparable periods of 2001. Excluding
the impact of the effect of September 11th, operating income for the 2001 third
quarter and nine month period would have been $315.9 million and $919.1 million,
respectively.

                                       33
<PAGE>
Operating income of $294.7 million in the 2002 third quarter was down $21.2
million compared to $315.9 million in the 2001 comparable quarter, excluding the
impact of September 11th. This decrease reflects unfavorable prior-year reserve
development in the 2002 third quarter of $207.2 million versus $3.0 million of
favorable prior-year reserve development in the prior year quarter. The 2002
third quarter prior-year reserve development includes a $191.0 million charge
related to asbestos versus a charge of $24.4 million in the prior period
quarter. This current period increase in asbestos-related reserves is based on
the Company's analysis of trends in reported losses, higher levels of claim
payments, the current litigation environment and settlement activities. As part
of a periodic, ground-up study of asbestos reserves, which is in process, the
Company continues to study the implications of these and other significant
developments, with special attention to major asbestos defendants and
non-products claims alleging that the Company's coverage obligations are not
subject to aggregate limits. The Company expects to complete this analysis
during the 2002 fourth quarter. The current period charge was largely offset by
a benefit of $159.3 million, included in other revenues, related to recoveries
under the Citigroup indemnification agreement. Despite strong cash flows from
operations, net investment income of $270.7 million was $13.0 million lower than
the prior year quarter due to reduced returns in the Company's alternative
investments portfolio and the lower interest rate environment. Significantly
offsetting the above was the benefit of the favorable premium rate environment
and higher production levels. The elimination of goodwill amortization and
disciplined expense management also benefited 2002 third quarter operating
income.

Operating income of $882.8 million for the 2002 nine months was down $36.3
million compared to $919.1 million for the 2001 comparable period, excluding the
impact of September 11th. The 2002 nine months operating income reflects similar
trends to the 2002 third quarter results. This decrease reflects unfavorable
prior-year reserve development in the 2002 nine months of $328.8 million versus
$18.3 million of favorable prior-year reserve development in the prior year
period. The 2002 nine month prior-year reserve development includes a $256.8
million charge related to asbestos versus a charge of $73.8 million in the prior
year period. The current period charge was partially offset by a benefit of
$159.3 million, included in other revenues, related to recoveries under the
Citigroup indemnification agreement. In addition, net investment income of
$833.6 million was $61.9 million lower than the 2001 nine months. Additionally,
there were no natural catastrophe losses in the 2002 nine months compared to
$20.5 million of weather related catastrophe losses in the prior year period.
Significantly offsetting the above was the benefit of the favorable premium rate
environment and higher production levels. The elimination of goodwill
amortization and disciplined expense management also benefited 2002 nine month
operating income.

Revenues of $2.361 billion and $6.631 billion in the 2002 third quarter and nine
months, respectively, increased $482.2 million and $899.9 million from $1.879
billion and $5.731 billion in the comparable periods of 2001. These increases
are primarily attributable to the inclusion of Northland and Associates in the
2002 third quarter and nine months, the benefit of the Citigroup indemnification
agreement and premium rate increases. Revenues related to Northland and
Associates in the 2002 third quarter and nine months were $244.7 million and
$702.7 million, respectively. The increases in revenue for the 2002 third
quarter and nine months were partially offset by lower net investment income
combined with realized investment losses in the 2002 third quarter and nine
months compared to realized investment gains in the 2001 third quarter and 2002
nine months.

Earned premiums increased $447.0 million and $1.089 billion to $1.758 billion
and $5.001 billion in the 2002 third quarter and nine months, respectively, from
$1.311 billion and $3.912 billion in the comparable periods of 2001. The
increases in earned premiums in the 2002 third quarter and nine months were
primarily due to the inclusion of Northland and Associates in the 2002 third
quarter and nine months and premium rate increases. Earned premiums related to
Northland and Associates in the 2002 third quarter and nine months were $231.6
million and $640.3 million, respectively.

                                       34
<PAGE>
Net investment income was $357.8 million and $1.110 billion in the 2002 third
quarter and nine months, respectively, a decrease of $24.3 million and $105.8
million from the comparable periods of 2001. The decrease in after-tax
investment yields reflected reduced returns in the Company's alternative
investment portfolio and the lower interest rate environment, partially offset
by an increase in average invested assets due to the inclusion of Northland and
Associates and increased cash flow from operations.

Fee income was $118.6 million and $330.1 million in the 2002 third quarter and
nine months, respectively, a $25.4 million and $75.3 million increase from the
comparable periods of 2001. National Accounts is the primary source of fee
income due to its service businesses, which include claim and loss prevention
services to large companies that choose to self insure a portion of their
insurance risks and claims and policy management services to workers'
compensation and automobile assigned risk plans and to self-insurance pools. The
increases in fee income were primarily due to the favorable rate environment and
the repopulation of the involuntary pools. Claim volume under administration
increased to $549.8 million and $2.016 billion for the 2002 third quarter and
nine months, respectively, compared to $414.0 million and $1.659 billion for the
comparable periods in 2001.

Other revenues increased to $160.9 million and $174.8 million in the 2002 third
quarter and nine months, respectively, from $3.3 million and $34.3 million in
the comparable periods of 2001. The increases in other revenues primarily
reflect a benefit of $159.3 million related to recoveries under the Citigroup
indemnification agreement.

Net written premiums by market were as follows:

<TABLE>
<CAPTION>
================================================================================
                                 THREE MONTHS ENDED        NINE MONTHS ENDED
                                    SEPTEMBER 30,            SEPTEMBER 30,
(in millions)                     2002         2001       2002          2001
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<S>                             <C>         <C>         <C>         <C>
National Accounts               $  218.6    $  115.8    $  512.2    $  319.0
Commercial Accounts                888.3       528.8     2,659.7     1,602.8
Select Accounts                    453.6       411.7     1,381.5     1,280.7
Bond                               175.4       147.8       466.5       457.8
Gulf                               103.7       153.9       428.9       518.2
--------------------------------------------------------------------------------
Total net written premiums      $1,839.6    $1,358.0    $5,448.8    $4,178.5
================================================================================
</TABLE>

Net written premiums increased $481.6 million to $1.840 billion and increased
$1.270 billion to $5.449 billion for the 2002 third quarter and nine months,
respectively, primarily due to the inclusion of Northland and Associates in the
2002 third quarter and nine months and premium rate increases as reflected in
renewal price increases. The inclusion of Northland and Associates contributed
$208.2 million and $691.2 million, respectively to these increases, including
approximately $115.0 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.

In addition to fee based products, National Accounts works with national and
regional brokers providing tailored insurance coverages and programs mainly to
large corporations. National Accounts also includes participation in state
mandated residual market workers' compensation and automobile assigned risk
plans. National Accounts net written premiums were $218.6 million and $512.2
million in the 2002 third quarter and nine months, respectively, compared to
$115.8 million and $319.0 million in the comparable periods of 2001. The
increases in National Accounts net written premiums were due to renewal price
increases, higher new business levels and the repopulation of residual market
pools.

                                       35
<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 68% to $888.3 million and 66% to $2.660 billion in the 2002 third
quarter and nine months, respectively. These increases were significantly
impacted by the inclusion in the 2002 third quarter and nine months of the
results of Northland and Associates. Northland and Associates net written
premiums include an increase of approximately $115.0 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
29% or $151.3 million and 23% or $365.7 million for the 2002 third quarter and
nine months, respectively, primarily driven by renewal price changes averaging
24% for the 2002 third quarter and nine months and strong growth in new
business. All major product lines - commercial automobile, property and general
liability - contributed to the rise in renewal pricing. The one area not showing
adequate improvement is the workers' compensation line. 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 third quarter and nine months was $160.2
million and $515.7 million compared to $115.4 million and $324.0 million in the
comparable periods of 2001. The business retention ratio for the 2002 third
quarter and nine months was 75%, up from 71% for the comparable periods of 2001.
For Commercial Lines, retention represents the estimated percentage of premium
available for renewal which renewed in the current period. 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 10% to $453.6 million and 8% to
$1.382 billion in the 2002 third quarter and nine months, respectively. The
increases in Select Accounts net written premiums primarily reflected renewal
price changes averaging 18% for both the 2002 third quarter and nine months. New
business premiums in Select Accounts for the 2002 third quarter and nine months
was $73.1 million and $212.4 million compared to $65.8 million and $212.8
million in the comparable periods of 2001. The business retention ratio for the
2002 third quarter and nine months, which was 79%, remained strong and fairly
consistent with the comparable periods of 2001. Select's retention remains
strongest for small commercial business handled through the Company's Service
Centers, while premium growth has been greatest in the commercial multiperil and
property lines of business.

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 $175.4 million and $466.5 million in the 2002 third
quarter and nine months, respectively, were $27.6 million and $8.7 million
higher than the comparable periods of 2001. The 2002 nine months amount is lower
by $17.5 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
nine months amount is higher by $34.1 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 $60.3
million during the 2002 nine months compared to the comparable period of 2001.
This increase reflects a favorable premium rate environment and strong
production growth in executive liability product lines, which target middle and
small market private accounts. In addition, the surety product lines benefited
from higher premium rates in the 2002 third quarter and nine months.

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 $103.7 million and $428.9 million
in the 2002 third quarter and nine months, respectively, compared to $153.9
million and $518.2 million in the comparable periods of 2001. Gulf's decision to
exit non-core businesses, 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.

                                       36
<PAGE>
Commercial Lines claims and expenses of $2.093 billion and $5.540 billion in the
2002 third quarter and nine months, respectively, increased $48.0 million and
$688.9 million from $2.045 billion and $4.851 billion in the comparable periods
of 2001. The 2002 increases were primarily due to the inclusion in the 2002
third quarter and nine months of the results of Northland and Associates, prior
year reserve development and increased loss cost trends, partially offset by the
$644.0 million of losses attributed to the effect of the terrorist attack in
2001. The inclusion of Northland and Associates in 2002 added $323.4 million and
$768.0 million to the third quarter and nine months, respectively, to claims and
expenses. Unfavorable prior year reserve development included in claims and
expenses in 2002 of $318.7 million and $505.8 million for the third quarter and
nine months, respectively, compared to 2001 favorable prior year reserve
development of $4.6 million and $28.2 million. The most significant component in
the 2002 third quarter and nine months prior year reserve development was
asbestos incurred losses which increased $256.2 million and $281.5 million,
respectively, over 2001 comparable periods. This increase in asbestos incurred
losses is based on the Company's analysis of trends in reported losses, higher
levels of claim payments, the current litigation environment and settlement
activities. For additional information see " - Asbestos Claims". The increase
was also partially offset by the elimination of goodwill amortization,
underwriting discipline, expense management, and by reduced natural catastrophe
losses.

There were no catastrophe losses in the 2002 third quarter or nine months.
Catastrophe losses, net of taxes and reinsurance, were $447.9 million and $468.4
million in the 2001 third quarter and nine months. Catastrophe losses in 2001
were primarily due to the terrorist attack on September 11th in the third
quarter, Tropical Storm Allison in the second quarter, and the Seattle
earthquake in the first quarter.

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

<TABLE>
<CAPTION>
========================================================================================================
                                              THREE MONTHS ENDED               NINE MONTHS ENDED
                                                 SEPTEMBER 30,                   SEPTEMBER 30,
                                                 -------------                   -------------
                                                           ADJUSTED(1)                      ADJUSTED(1)
                                       2002       2001        2001        2002      2001       2001
========================================================================================================
<S>                                   <C>         <C>      <C>           <C>       <C>      <C>
STATUTORY:
    Loss and LAE ratio                 86.6%      120.5%      69.0%       78.1%     87.6%      70.3%
    Underwriting expense ratio         25.9        29.2       28.2        26.0      29.0       28.7
    Combined ratio before
       policyholder dividends         112.5       149.7       97.2       104.1     116.6       99.0
    Combined ratio                    112.7       150.3       97.7       104.3     117.1       99.5
--------------------------------------------------------------------------------------------------------
GAAP:
    Loss and LAE ratio                 71.5%      120.1%      68.6%       72.5%     87.3%      70.0%
    Underwriting expense ratio         26.6        28.3       27.3        26.6      29.7       29.4
    Combined ratio before
       policyholder dividends          98.1       148.4       95.9        99.1     117.0       99.4
    Combined ratio                     98.3       149.0       96.4        99.3     117.5       99.9
========================================================================================================
</TABLE>

(1)   Adjusted 2001 ratios exclude the effect of the terrorist attack on
      September 11, 2001.

GAAP combined ratios differ from statutory combined ratios primarily due to the
exclusion of asbestos-related losses subject to recoverability under the
Citigroup indemnification agreement for GAAP ratio computation purposes only.
The Citigroup indemnification agreement is between TPC (a non insurance company)
and Citigroup and therefore does not impact statutory results. GAAP combined
ratios also differ from statutory combined ratios due to the deferral and
amortization of certain expenses for GAAP reporting purposes only. Commencing in
the third quarter of 2002, the GAAP underwriting expense ratio has been computed
using net earned premiums. Previously, this ratio for GAAP purposes was computed
using net written premiums. Prior periods have been restated to conform to this
new presentation.

                                       37
<PAGE>
The 2002 third quarter and nine month statutory combined ratios include the
$245.0 million of asbestos-related losses subject to the indemnification
agreement with Citigroup that added 13.9 points and 4.9 points to both the
statutory loss and loss adjustment expense ratio and the statutory combined
ratio for the 2002 third quarter and nine months, respectively.

The increase in the 2002 third quarter GAAP combined ratio before policyholder
dividends compared to the 2001 third quarter, excluding the impact of the
terrorist attack on September 11th, reflects an increase in the loss and loss
adjustment expense ratio partially offset by an improvement in the underwriting
expense ratio. The increase in the loss and loss adjustment expense ratio is
primarily due to unfavorable prior-year reserve development in the 2002 third
quarter compared to favorable prior-year reserve development in the prior year
quarter. The 2002 third quarter also benefited from the favorable premium rate
environment as well as targeted changes in the Company's business mix. The
improvement in the underwriting expense ratio is primarily attributed to the
benefit of premium rate increases and elimination of goodwill amortization,
partially offset by higher contingent commission expense in the 2002 third
quarter due to improved underwriting results and a nonrecurring expense benefit
in the prior year quarter.

The slight improvement in the 2002 nine month GAAP combined ratio before
policyholder dividends compared to the 2001 nine month period, excluding the
impact of the terrorist attack on September 11th, reflects an increase in the
loss and loss adjustment expense ratio more than offset by an improvement in the
underwriting expense ratio. The increase in the loss and loss adjustment expense
ratio is primarily due to unfavorable prior-year reserve development in the 2002
third quarter compared to favorable prior-year reserve development in the prior
year quarter. The 2002 nine months also benefited from the favorable premium
rate environment as well as targeted changes in the Company's business mix and
no weather related catastrophe losses in the 2002 nine months compared to
weather related catastrophes in the prior year period. The improvement in the
underwriting expense ratio reflects similar trends to the 2002 third quarter
ratio including an improvement from the elimination of goodwill amortization.

PERSONAL LINES

<TABLE>
<CAPTION>
======================================================================================================
                                                          THREE MONTHS ENDED       NINE MONTHS ENDED
                                                             SEPTEMBER 30,           SEPTEMBER 30,
(in millions)                                              2002        2001        2002         2001
------------------------------------------------------------------------------------------------------
<S>                                                      <C>         <C>         <C>         <C>
Revenues                                                 $1,203.4    $1,125.8    $3,484.3    $3,317.0
------------------------------------------------------------------------------------------------------
Income before cumulative effect of change
    in accounting principle                              $   81.0    $   39.9    $  183.3    $  194.8
Cumulative effect of change in accounting principle            --          --          --         0.5
------------------------------------------------------------------------------------------------------
Net income                                               $   81.0    $   39.9    $  183.3    $  195.3
======================================================================================================
</TABLE>

Net income was $81.0 million and $183.3 million in the 2002 third quarter and
nine months, respectively, compared to $39.9 million and $195.3 million in the
comparable periods of 2001. Included in the third quarter and nine months of
2001 was a net loss of $41.6 related to the terrorist attack on September 11,
2001. Personal Lines net income included $11.0 million and $48.3 million of
realized investment losses in the 2002 third quarter and nine months,
respectively, and $5.9 million and $16.5 million of realized investment gains in
the 2001 third quarter and nine months.

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 $92.0 million and $233.2
million in the 2002 third quarter and nine months, respectively, compared to
$34.8 million and $180.9 million in the comparable periods of 2001. The increase
in operating income for the 2002 third quarter and nine months compared to the
2001 comparable periods was principally due to a net loss of $41.6 million
related to the impact of September 11th on 2001 results. Excluding the impact of
September 11th, operating income in the 2001 third quarter and nine months was
$76.4 million and $222.5 million, respectively.

                                       38
<PAGE>
Operating income of $92.0 million for the 2002 third quarter was $15.6 million
higher than $76.4 million for the 2001 comparable period, excluding the impact
of September 11th. The 2002 third quarter operating income benefited from an
improving premium rate environment and moderating loss trends. Third quarter
underwriting results reflect the benefit of a reduction in the estimated 2002
accident year loss ratio, primarily in automobile, due to greater than expected
moderation in loss cost trends. The portion of the benefit that related to the
first six months of 2002 approximated $16.0 million. The elimination of goodwill
amortization and disciplined expense management also contributed to the increase
in 2002 third quarter operating income. Operating income in the 2002 third
quarter was unfavorably impacted by weather related catastrophe losses of $11.1
million compared to no natural weather related catastrophe losses in the prior
year quarter. In addition, net investment income of $61.5 million was $7.8
million lower than the 2001 third quarter. Also impacting operating income was
unfavorable prior-year reserve development in the 2002 third quarter of $2.0
million versus $3.3 million of favorable prior-year reserve development in the
prior year quarter.

Operating income of $233.2 million for the 2002 nine months was $10.7 million
higher than the $222.5 million for the 2001 comparable period, excluding the
impact of September 11th. The 2002 nine months operating income reflects similar
trends to the 2002 third quarter results. The 2002 nine months benefited by an
improving rate environment and moderating loss trends. Weather related
catastrophe losses of $35.8 million in the 2002 nine months were lower compared
to $42.3 million of weather related catastrophe losses in the prior year period.
Operating income in the 2002 nine months was unfavorably impacted by lower net
investment income of $205.5 million which was $18.5 million lower than the 2001
nine months. Also impacting operating income was unfavorable prior-year reserve
development in the 2002 nine months of $7.9 million versus $16.3 million of
favorable prior-year reserve development in the prior year period.

Revenues during the 2002 third quarter and nine months of $1.203 billion and
$3.484 billion, respectively, increased $77.6 million and $167.3 million from
the comparable periods of 2001. The increases in revenues reflected growth in
earned premiums due to premium rate increases as reflected in renewal price
increases and the inclusion of Northland in the 2002 third quarter and nine
months, partially offset by realized investment losses in the 2002 third quarter
and nine months compared to realized investment gains in the comparable periods
of 2001 and a decrease in net investment income. The inclusion of Northland in
the 2002 third quarter and nine months increased revenues by $31.9 million and
$91.4 million, respectively.

Earned premiums increased $114.1 million and $290.7 million to $1.118 billion
and $3.216 billion in the 2002 third quarter and nine months, respectively, from
$1.003 billion and $2.925 billion in the comparable periods of 2001. The
increase in earned premiums in the 2002 third quarter and nine months was
primarily due to renewal price increases in all product lines and the inclusion
of Northland in 2002, which added $29.5 million and $83.4 million, respectively.

Net investment income was $83.4 million and $283.0 million in the 2002 third
quarter and nine months, respectively, a decrease of $12.5 million and $29.8
million from the comparable periods of 2001. The declines resulted from reduced
returns in our alternative investments portfolio and the lower interest rate
environment, partially offset by an increase in average invested assets due to
the inclusion of Northland and increased cash flow from operations.

Other revenues was $19.6 million and $59.9 million in the 2002 third quarter and
nine months, respectively, a $2.2 million and $6.1 million increase from the
comparable periods of 2001. Premium installment charges are the primary source
of Personal Lines other income. The increase in other revenues was primarily due
to the inclusion of Northland in the 2002 third quarter and nine months.

                                       39
<PAGE>
Net written premiums by product line:

<TABLE>
<CAPTION>
================================================================================
                                  THREE MONTHS ENDED      NINE MONTHS ENDED
                                    SEPTEMBER 30,          SEPTEMBER 30,
(in millions)                     2002        2001        2002        2001
--------------------------------------------------------------------------------
<S>                             <C>         <C>         <C>         <C>
Personal automobile             $  741.8    $  663.0    $2,143.5    $1,938.4
Homeowners and other               476.2       412.4     1,285.9     1,135.3
--------------------------------------------------------------------------------
Total net written premiums      $1,218.0    $1,075.4    $3,429.4    $3,073.7
================================================================================
</TABLE>

The increase in net written premiums of $142.6 million in the 2002 third quarter
and $355.7 million in the nine month period was principally a result of renewal
price increases in both the Automobile and Homeowners and Other lines of
business. The Northland acquisition contributed $22.9 million and $86.9 million
to this rise in the 2002 quarter and nine month period, respectively.

Automobile net written premiums increased 12% to $741.8 million and 11% to
$2.144 billion in the 2002 third quarter and nine month period, respectively.
Excluding the impact of Northland, Automobile net written premiums increased 9%
to $722.5 million and 7% to $2.068 billion, respectively. Renewal price changes
for standard voluntary business were 8% for both the 2002 third quarter and nine
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.
Policy retention levels for standard voluntary business remained favorable and
averaged 80%.

Homeowners and Other net written premiums increased 15% to $476.2 million and
13% to $1.286 billion in the 2002 third quarter and nine month period,
respectively. Excluding the impact of Northland, Homeowners and Other net
written premiums increased 15% to $472.6 million and 12% to $1.275 billion,
respectively. Renewal price changes averaged 15% for both the 2002 third quarter
and nine month period, respectively. Retention levels also remained favorable
and averaged 80%.

Production through the Company's independent agents in Personal Lines, which
represents over 81% of Personal Lines total net written premiums, was up 15% to
$995.8 million in the 2002 third quarter and up 14% to $2.808 billion for the
2002 nine month period, including the impact of Northland. Net written premiums
through channels other than independent agents was up 7% to $222.2 million for
the 2002 third quarter and 3% to $621.5 million for the nine month period as the
favorable impact of renewal price changes was offset in part by a reduction in
policies in force due to underwriting actions taken to eliminate marginally
profitable businesses.

Personal Lines claims and expenses of $1.090 billion and $3.235 billion in the
2002 third quarter and nine months, respectively, increased $17.7 million and
$193.7 million from $1.073 billion and $3.042 billion in the comparable periods
of 2001. The 2002 increases were primarily attributed to the net effect of the
inclusion in the 2002 third quarter and nine months of the results of Northland,
increased loss cost trends, and prior year reserve development. Claims and
expenses in the 2002 third quarter also include the benefit of a reduction in
the estimated 2002 accident year loss ratio, primarily in automobile, due to
greater than expected moderation in loss cost trends. The inclusion of Northland
added $26.6 million and $90.3 million, respectively, to claims and expenses in
the 2002 third quarter and nine months. Claims and expenses in the 2001 periods
include $60.0 million related to the event of September 11th. The 2002 third
quarter and nine months include $3.1 million and $12.1 million, respectively, of
unfavorable prior-year reserve development versus favorable prior-year reserve
development of $5.0 million and $25.0 million, respectively, in the 2001 third
quarter and nine months. Also impacting year over year were lower natural
catastrophe losses and the benefit of the elimination of goodwill amortization.

                                       40
<PAGE>
Catastrophe losses, net of tax and reinsurance, were $11.1 million and $35.8
million in the 2002 third quarter and nine months, respectively, compared to
$41.6 million and $83.9 million in 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 wind and hailstorms in the mid Atlantic region in the
second and third quarters. Catastrophe losses in 2001 were primarily due to the
terrorist attack on September 11th in the third quarter and Tropical Storm
Allison and wind and hailstorms in the Midwest and Texas in the second quarter.

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

<TABLE>
<CAPTION>
====================================================================================================
                                            THREE MONTHS ENDED             NINE MONTHS ENDED
                                               SEPTEMBER 30,                 SEPTEMBER 30,
                                               -------------                 -------------
                                                        ADJUSTED(1)                      ADJUSTED(1)
                                      2002      2001      2001         2002      2001       2001
----------------------------------------------------------------------------------------------------
<S>                                  <C>       <C>      <C>            <C>      <C>      <C>
STATUTORY:
    Loss and LAE ratio                72.2%     79.9%      73.6%       75.0%     77.1%      74.9%
    Underwriting expense ratio        24.3      25.4       25.3        24.4      25.4       25.3
    Combined ratio                    96.5     105.3       98.9        99.4     102.5      100.2
----------------------------------------------------------------------------------------------------
GAAP:
    Loss and LAE ratio                72.2%     79.9%      73.6%       75.0%     77.1%      74.9%
    Underwriting expense ratio        25.4      27.0       26.9        25.6      26.9       26.9
    Combined ratio                    97.6     106.9      100.5       100.6     104.0      101.8
====================================================================================================
</TABLE>

(1)   Adjusted 2001 ratios exclude the effect of the terrorist attack on
      September 11, 2001.

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. Commencing in the third quarter of 2002, the GAAP
underwriting expense ratio has been computed using net earned premiums.
Previously, this ratio for GAAP purposes was computed using net written
premiums. Prior periods have been restated to conform to this new presentation.

The improvement in the 2002 third quarter GAAP combined ratio compared to the
2001 third quarter, excluding the impact of the terrorist attack on September
11th, reflects an improvement in both the loss and loss adjustment expense ratio
and in the underwriting expense ratio. The improvement in the loss and loss
adjustment expense ratio is primarily attributed to the reduction in the 2002
accident year loss ratio resulting from rate increases achieved and the
moderation in loss cost trends. Offsetting these improvements were weather
related catastrophe losses in the 2002 third quarter compared to no natural
catastrophes losses in the prior year quarter and unfavorable prior-year reserve
development in the 2002 third quarter compared to favorable prior-year reserve
development in the prior year quarter. The improvement in the underwriting
expense ratio is primarily attributed to the benefit of premium rate increases.
An increase in contingent commissions, resulting from the improved underwriting
results, offset an overall reduction in other expenses. The underwriting expense
ratio also reflects an improvement from the elimination of goodwill
amortization.

The improvement in the 2002 nine month GAAP combined ratio compared to the 2001
nine month period, excluding the impact of the terrorist attack on September
11th, reflects a slight increase in the loss and loss adjustment expense ratio
more than offset by an improvement in the underwriting expense ratio. The
increase in the loss and loss adjustment expense ratio is primarily attributed
to unfavorable prior-year reserve development in the 2002 nine months compared
to a favorable prior-year reserve development in the prior year period.
Offsetting this increase was the benefit of rate increases and lower weather
related catastrophe losses in the 2002 nine months compared to the prior year
period. The improvement in the underwriting expense ratio reflects similar
trends to the 2002 third quarter ratio.

                                       41
<PAGE>
INTEREST EXPENSE AND OTHER

<TABLE>
<CAPTION>
====================================================================
                        THREE MONTHS ENDED      NINE MONTHS ENDED
                           SEPTEMBER 30,          SEPTEMBER 30,
(in millions)             2002       2001        2002       2001
--------------------------------------------------------------------
<S>                     <C>         <C>        <C>        <C>
Revenues                 $ (0.3)    $  8.1     $  1.0     $   5.4
Net loss                 $(20.9)    $(25.8)    $(67.3)    $(112.0)
====================================================================
</TABLE>

The primary component of net loss was after-tax interest expense of $25.5
million and $73.9 million in the 2002 third quarter and nine months,
respectively, and $30.2 million and $107.1 million in the 2001 comparable
periods. The reduction in interest expense in the 2002 third quarter and nine
months is due to lower average interest-bearing debt levels primarily related to
the repayment of debt obligations to Citigroup in the 2002 first quarter.
Included in the 2001 quarter was the after tax benefit of a $5.7 million
dividend from an investment that was sold to Citigroup in 2002.

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 September 30, 2002, approximately 75% of the net
environmental reserve (approximately $255.0 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 25% of the net environmental reserve (approximately
$87.0 million), consists of case reserves for resolved claims.

In establishing environmental reserves, the Company evaluates the exposure
presented by each insured and the anticipated cost of resolution, if any, for
each insured on a quarterly basis. In the course of this analysis, the Company
considers the probable liability, available coverage, relevant judicial
interpretations and historical value of similar exposures. In addition, the
Company considers the many variables presented, such as the nature of the
alleged activities of the insured at each site; the allegations of environmental
harm at each site; the number of sites; the total number of potentially
responsible parties at each site; the nature of environmental harm and the
corresponding remedy at each site; the nature of government enforcement
activities at each site; the ownership and general use of each site; the overall
nature of the insurance relationship between the Company and the insured,
including the role of any umbrella or excess insurance the Company has issued to
the insured; the involvement of other insurers; the potential for other
available coverage, including the number of years of coverage; the role, if any,
of non-environmental claims or potential non-environmental claims, in any
resolution process; and the applicable law in each jurisdiction.

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.

                                       42
<PAGE>
The following table displays activity for environmental losses and loss expenses
and reserves:

<TABLE>
<CAPTION>
================================================================================
ENVIRONMENTAL LOSSES                                   AS OF AND FOR THE
                                                      NINE MONTHS ENDED
                                                         SEPTEMBER 30,
                                                       2002         2001
(in millions)
--------------------------------------------------------------------------------
<S>                                                   <C>        <C>
Beginning reserves:
    Direct                                            $478.8     $ 668.8
    Ceded                                              (82.8)     (110.9)
--------------------------------------------------------------------------------
    Net                                                396.0       557.9

Incurred losses and loss expenses:
    Direct                                              49.6        41.2
    Ceded                                                0.5        (7.0)

Losses paid:
    Direct                                             121.1       197.6
    Ceded                                              (17.0)      (37.8)
--------------------------------------------------------------------------------
Ending reserves:
    Direct                                             407.3       512.4
    Ceded                                              (65.3)      (80.1)
--------------------------------------------------------------------------------
       Net                                            $342.0     $ 432.3
================================================================================
</TABLE>

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 by the Company's
insureds, including claims against the Company's insureds 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. The Company is
currently involved in coverage litigation concerning a number of policyholders
who have filed bankruptcy, including, among others, ACandS, Inc., which has
asserted that all or a portion of their asbestos-related claims are not subject
to aggregate limits on coverage as described generally in the next paragraph.
See "Legal Proceedings". Particularly during the last few months of 2001 and
continuing into 2002, the trends described above have both accelerated and
become more visible. Accordingly, there is a high degree of uncertainty with
respect to future exposure from asbestos claims.

                                       43
<PAGE>
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 or whether the Company will be successful in asserting
additional defenses, to the extent both issues are resolved in their favor and
other additional defenses are not successful, 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.

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 are favorable
to the Company which could result in settlements for larger amounts than
originally anticipated. As in the past, the Company will continue to
aggressively pursue settlement opportunities.

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. 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. See "Legal Proceedings."

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 and applicability of the result derived from the division of
the ending direct and net reserves by prior period direct and net paid activity,
also known as the survival ratio. Losses paid, both direct and ceded, have
increased in the first nine months of 2002 compared to the first nine months of
2001. 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 including those from
prior settlements of coverage disputes entered into between the Company and
certain of its policyholders. For the first nine months of 2002 approximately
60% of total paid losses relate to policyholders with whom the Company
previously entered into settlement agreements that limit the Company's
liability.

                                       44
<PAGE>
At September 30, 2002, asbestos reserves were $950.3 million, an increase of
$129.9 million compared to $820.4 million as of December 31, 2001. Net incurred
losses and loss expenses were $395.0 million for the 2002 nine months compared
to $113.5 million for the 2001 nine months. This increase is primarily due to a
third quarter charge resulting from a $293.8 million increase to asbestos
reserves, or an after tax charge of $191.0 million. This charge was largely
offset by an after tax benefit of $159.3 million, included in other revenues,
related to recoveries under the Citigroup indemnification agreement. The
increase in reserves is based on the Company's analysis of trends in reported
losses, higher levels of claim payments, the current litigation environment and
settlement activities. As part of a periodic, ground-up study of asbestos
reserves, which is in process, the Company continues to study the implications
of these and other significant developments, with special attention to major
asbestos defendants and non-products claims alleging that the Company's coverage
obligations are not subject to aggregate limits. The Company expects to complete
this analysis during the 2002 fourth quarter. At the conclusion of this study,
including the consideration of any asbestos related events occurring in 2002,
the Company intends to review its level of asbestos reserves. Net losses paid
were $265.1 million for the 2002 nine months compared to $112.2 million for the
2001 nine months reflective of the items described above. 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
                                                         NINE MONTHS ENDED
                                                           SEPTEMBER 30,
(in millions)                                            2002          2001
--------------------------------------------------------------------------------
<S>                                                    <C>          <C>
Beginning reserves:
    Direct                                             $1,046.0     $1,005.4
    Ceded                                                (225.6)      (199.0)
--------------------------------------------------------------------------------
    Net                                                   820.4        806.4

Incurred losses and loss expenses:
    Direct                                                442.3        188.2
    Ceded                                                 (47.3)       (74.7)

Losses paid:
    Direct                                                300.0        155.4
    Ceded                                                 (34.9)       (43.2)
--------------------------------------------------------------------------------
Ending reserves:
    Direct                                              1,188.3      1,038.2
    Ceded                                                (238.0)      (230.5)
--------------------------------------------------------------------------------
       Net                                             $  950.3     $  807.7
================================================================================
</TABLE>

                                       45
<PAGE>
In August 2002, the Company entered into an agreement with Shook & Fletcher
Insulation Co. (Shook) settling coverage litigation under insurance policies
which the Company issued to Shook. Prior to entering into the settlement, Shook
had filed a voluntary petition for bankruptcy. In October 2002, the bankruptcy
court issued an order approving the settlement with the Company. This settlement
is valued at approximately $78.0 million (after reinsurance, tax and
discounting). The settlement is subject to customary contingencies, including
final court approval. The Company is fully reserved as of September 30, 2002 for
its payment obligations under the settlement agreement.

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 to
occur. 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 $240.0 million (after tax and discounting) and would be covered by
reserves and additional charges that would be taken if the settlement agreement
is finalized and other settlement contingencies are met. 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, management believes
that the reserves carried for environmental and asbestos claims at September 30,
2002 are appropriately established based upon known facts, current law and
management's judgment. 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
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. As part of a periodic, ground-up study
of asbestos reserves, which is in process, the Company continues to study the
implications of these and other significant developments, with special attention
to major asbestos defendants and non-products claims alleging that the Company's
coverage obligations are not subject to aggregate limits. The Company expects to
complete this analysis during the 2002 fourth quarter.

                                       46
<PAGE>
Because of the uncertainties set forth above, additional liabilities may arise
for amounts in excess of the current related reserves. In addition, the
Company's estimate of ultimate claims and claim adjustment expenses may change.
These additional liabilities or increases in estimates, or a range of either,
cannot now be reasonably estimated and could result in income statement charges
that could be material to the Company's operating results and financial
condition in future periods. In March 2002, Citigroup entered into an agreement
under which it provides the Company with 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 $150.0 million,
net of any reinsurance up to a cumulative aggregate of $800.0 million, reduced
by the tax effect of the highest applicable federal income tax rate. During the
quarter ended September 30, 2002, the Company recorded $245.0 million of
asbestos incurred losses, net of reinsurance, in excess of the $150.0 million
annual deductible. After the current quarter charge, $555.0 million of future
recoveries (including tax benefits) remains available under this agreement.

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 September 30, 2002, approximately 80% (approximately $532.0 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 20% of
the net aggregate reserve (approximately $131.3 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
                                                       NINE MONTHS ENDED
                                                         SEPTEMBER 30,
(in millions)                                         2002          2001
--------------------------------------------------------------------------------
<S>                                                 <C>         <C>
Beginning reserves:
    Direct                                          $ 893.4     $1,078.6
    Ceded                                            (183.4)      (279.5)
--------------------------------------------------------------------------------
    Net                                               710.0        799.1

Incurred losses and loss expenses:
    Direct                                              5.7        (58.8)
    Ceded                                             (11.0)        39.9

Losses paid:
    Direct                                             45.8         59.6
    Ceded                                              (4.4)       (28.5)
--------------------------------------------------------------------------------
Ending reserves:
    Direct                                            853.3        960.2
    Ceded                                            (190.0)      (211.1)
--------------------------------------------------------------------------------
       Net                                          $ 663.3     $  749.1
================================================================================
</TABLE>

                                       47
<PAGE>
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.

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 September 30, 2002 totaled $35.4 billion, of
which 90% 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 6% 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 $250.0 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 September
30, 2002, there were no outstanding borrowings under this revolving line of
credit.

At September 30, 2002 total cash and short-term invested assets aggregating
$1.002 billion were held at the Company's two holding companies, TPC and TIGHI.
These liquid assets were primarily funded by dividends received from the
Company's operating subsidiaries. These liquid assets, combined with the
anticipated receipt of $159.3 million recoverable under the Citigroup asbestos
indemnification agreement, combined with other sources of funds available to the
TPC, primarily additional dividends from the Company's operating subsidiaries,
are considered sufficient to meet the liquidity requirements of the Company's
holding companies.

Contractual obligations at September 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 former affiliates                     $1,500.0    $1,000.0    $500.0    $   --      $     --
Long-term debt                                            377.0         3.0      12.0     156.0         206.0
Convertible junior subordinated notes payable             892.5          --        --        --         892.5
Convertible notes payable                                  49.7          --        --        --          49.7
TIGHI-obligated mandatorily redeemable
    securities of subsidiary trusts
    holding solely junior subordinated
    debt securities of TIGHI                              900.0          --        --        --         900.0
Operating leases                                          281.5        82.5     108.1      55.1          35.8
--------------------------------------------------------------------------------------------------------------
                                                       $4,000.7    $1,085.5    $620.1    $211.1      $2,084.0
==============================================================================================================
</TABLE>

                                       48
<PAGE>
TIGHI has a $500.0 million line of credit agreement with a Citigroup affiliated
company. This line of credit expires in December 2006. At September 30, 2002,
there was $500.0 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.

On September 25, 2002, the Board of Directors approved a $500.0 million share
repurchase program. Purchases of class A and class B stock may be made from time
to time over the next two years in the open market, and it is expected that
funding for the program will principally come from operating cash flow. Shares
repurchased will be authorized and unissued and are reported as treasury stock
in the consolidated balance sheet.

TPC's insurance subsidiaries are subject to various regulatory restrictions that
limit the maximum amount of dividends that can be paid to their parent without
prior approval of insurance regulatory authorities. TPC's insurance subsidiaries
paid dividends of $825.0 million to TIGHI during the first nine months of 2002.
Any dividends to be paid during the remainder of 2002 may be subject to approval
by the Connecticut Insurance Department.

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.

Under the terms of the Tax Allocation Agreement between TPC and Citigroup, TPC
is financially responsible for adverse tax consequences on the tax-free status
of the Citigroup Distribution as a result of actions taken by TPC. One of the
potential post Citigroup Distribution actions by TPC, which could adversely
impact the tax status of the Citigroup Distribution, is the issuance of
additional common stock within two years of the Citigroup Distribution. On April
23, 2002, the Internal Revenue Service issued temporary regulations governing
certain aspects of spin-off distributions occurring after April 26, 2002. In
these temporary regulations, safe harbor rules are provided under which certain
post spin-off transactions involving common stock do not adversely impact the
tax status of the spin-off. In certain circumstances, these rules provide TPC
with additional flexibility to issue additional common stock in corporate
transactions as compared to the rules that were in place at the time of the TPC
IPO.

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.

                                       49
<PAGE>
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 $266.0
million before any reinsurance, recoveries and taxes. All defendants have filed
answers, affirmative defenses 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 seeking to add fraudulent concealment
allegations against the Sureties and seeking additional relief, including
punitive damages. The Sureties filed a motion to dismiss this amended complaint,
which was granted. In September 2002, the plaintiff filed a second motion for
summary judgment, which is being opposed by all defendants. The Company is
vigorously defending the lawsuit and, in the opinion of the Company's
management, the Company has meritorious defenses. Trial is scheduled for
December 2002.

CRITICAL ACCOUNTING POLICIES

The Company considers its most significant accounting policies to be those
applied to unpaid claim and claim adjustment liabilities. Further explanation of
how management applies its judgment is included throughout this Management's
Discussion and Analysis and in the notes to the consolidated financial
statements for the year ended December 31, 2001 included in the Company's
Registration Statement on Form S-1.

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 $489.5 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.

                                       50
<PAGE>
Some of the Company's loss reserves are for environmental and asbestos claims
and related litigation. Although management believes that the reserves carried
for environmental and asbestos claims at September 30, 2002 are appropriately
established based upon known facts, current law and management's judgment, given
the uncertainty surrounding the final resolution of these claims, it is possible
that additional liabilities or increases in estimates, or a range of either,
could result in income statement charges that could be material to the Company's
operating results and financial condition in future periods. In March 2002, the
Company entered into an agreement with Citigroup under which Citigroup will
provide the Company with 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 up to $800.0 million, reduced by
the tax effect of the highest applicable federal income tax rate. In the third
quarter of 2002 the Company incurred asbestos-related income charges, net of
reinsurance, of $245.0 million in excess of the annual $150.0 million
deductible. Included in other revenues is $159.3 million related to the benefit
provided by the agreement which represents the $245.0 million charge in excess
of the $150.0 million deductible, reduced by the related tax benefit provided.
Included in federal income taxes in the statement of income is a related tax
benefit of $85.7 million. At September 30, 2002, $555.0 million of future
recoveries (including tax benefits) remains available under the agreement. See
the preceding discussion of Environmental Claims and Asbestos Claims.

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.

                                       51
<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 former
affiliates and long-term debt, see note 8 to the condensed consolidated
financial statements.

The Company analyses quantitative information about market risk based on a
sensitivity analysis model. As of September 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.

ITEM 4. CONTROLS AND PROCEDURES

The Company has established and maintains "disclosure controls and procedures"
(as those terms are defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Robert I. Lipp, Chairman
and Chief Executive Officer of the Company, and Jay S. Benet, Chief Financial
Officer of the Company, have evaluated the Company's disclosure controls and
procedures within ninety days of the filing of this Form 10-Q. Based on their
evaluations, Messrs. Lipp and Benet have concluded that the Company's disclosure
controls and procedures are effective to ensure that the information required to
be disclosed by the Company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified by SEC rules and Forms.

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls after the date of their
evaluations. There were no significant deficiencies or material weaknesses, and
therefore there were no corrective actions taken.

                                       52
<PAGE>
PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

This section describes certain major pending legal proceedings 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 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. The appellate
court heard oral argument on defendants' appeal of the Texas class certification
ruling in September 2002 and reserved decision. The plaintiffs have now
dismissed the New York and Michigan cases. The Company is vigorously defending
all of these cases and Company management believes the Company has meritorious
defenses; however the outcome of these disputes is uncertain.

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.,
USDC S.D. NY, commenced in December 2001) 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 $266.0 million before any
reinsurance, recoveries and taxes. All defendants have filed answers,
affirmative defenses 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 seeking to add fraudulent concealment allegations against
the Sureties and seeking additional relief, including punitive damages. The
Sureties filed a motion to dismiss this amended complaint, which was granted. In
September 2002, the plaintiff filed a second motion for summary judgment, which
is being opposed by all defendants. The Company is vigorously defending the
lawsuit and Company management believes the Company has meritorious defenses;
however the outcome of this dispute is uncertain. Trial is scheduled for
December 2002.

                                       53
<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 in Circuit Court of Kanawha County WV,
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 which was filed in May
2002 in Massachusetts state court (Cashman v. Travelers Superior Court, Suffolk
County MA). The complaint in Cashman v. Travelers contains 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 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.

The Company is vigorously defending all of these cases and Company management
believes the Company has meritorious defenses. These defenses include the fact
that these novel theories have no basis in law; that they are directly at odds
with the well established law pertaining to the insured/insurer relationship;
that there is no generalized duty to warn as alleged by the plaintiffs; that to
the extent that they have not been released by virtue of prior settlement
agreements by the claimants with the Company's policyholders, all of these
claims were released by virtue of approved settlements and orders entered by the
Johns Manville bankruptcy court; and that the applicable statute of limitation
as to many of these claims has long since expired.

In the ordinary course of its insurance business, the Company receives claims
for insurance arising under policies issued by the Company asserting alleged
injuries and damages from asbestos and other hazardous waste and toxic
substances which are the subject of related coverage litigation, including,
among others, the litigation described below. The conditions surrounding the
final resolution of these claims and the related litigation continue to change.

                                       54
<PAGE>
The Company is involved in a number of proceedings relating to ACandS, Inc.,
formerly a national installer of products containing asbestos. During the third
quarter two significant events occurred involving ACandS, Inc. First, ACandS
filed for bankruptcy in September 2002 (In re: ACandS, Inc., pending in the U.S.
Bankruptcy Court for the District of Delaware). At the time of its filing,
ACandS asserted that it had settled or was in the process of settling the large
number of asbestos-related claims pending against it by negotiating with the
claimants and assigning them ACandS' rights to recover under insurance policies
issued by the Company. ACandS has asserted that the Company is responsible for
the financial obligations created by these settlements as well as for any future
claims brought against it, and that, insurance policy aggregate limits do not
apply. Second, in August 2002, in a pending insurance coverage arbitration
(commenced in January 2001), the panel of arbitrators scheduled the presentation
of the case to commence in April 2003. In addition to the arbitration and the
bankruptcy proceeding, the Company and ACandS are also involved in insurance
coverage litigation (ACandS, Inc. v. Travelers Casualty & Surety Co., USDC,
E.D.Pa, commenced in September 2000). No trial date has been set in this case.
The Company is vigorously defending these cases and Company management believes
the Company has meritorious defenses. In the bankruptcy, arbitration and
litigation proceedings, the Company has asserted or will assert numerous
defenses, including that the claims against ACandS are subject to aggregate
limits which have already been exhausted because the relevant policies were
issued after ACandS ceased installing asbestos-related materials; that even if
not subject to aggregate limits, the occurrence limits in the policies
substantially reduce or eliminate the Company's obligations; that the
settlements entered into between ACandS and the asbestos claimants are not
binding on the Company; and that any plan of reorganization which ACandS files
is defective to the extent it seeks to accelerate any of the Company's
obligations under policies issued to ACandS or deprive the Company of its right
to litigate the claims against ACandS.

Currently, it is not possible to predict legal and legislative outcomes and
their impact on the future development of claims and litigation relating to
asbestos and other hazardous waste and toxic substances. Any such 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 reserves. In
addition, the Company's estimate of ultimate claims and claim adjustment
expenses may change. These additional liabilities or increases in estimates, or
a range of either, cannot now be reasonably estimated and could result in income
statement charges 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; however the outcome of
these disputes is uncertain. 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. For a discussion of recent settlement activity and other
information regarding our environmental and asbestos exposure, 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.

                                       55
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(A)   EXHIBITS:

      See Exhibit Index.

(B)   REPORTS ON FORM 8-K:

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.

On August 21, 2002, the Company filed a Current Report on Form 8-K, dated August
20, 2002, reporting under Item 5 thereof that Citigroup completed its spin-off
of the Company by distributing shares of the Company's class A and class B
common stock to Citigroup stockholders.

On September 26, 2002, the Company filed a Current Report on Form 8-K dated
September 25, 2002, reporting under Item 5 thereof the announcement that seven
persons had been elected to the Company's Board of Directors and that the
Company's Board of Directors approved a share repurchase program.

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

On October 17, 2002, the Company filed a Current Report on Form 8-K, dated
October 16, 2002, reporting under Item 5 thereof the results of the Company's
operations for the quarter ended September 30, 2002, and certain other selected
financial data.

                                       56
<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.

                                       TRAVELERS PROPERTY CASUALTY CORP.

Date:   November 14, 2002              By  /s/ Jay S. Benet
                                          ------------------------------------
                                               Jay S. Benet
                                               Chief Financial Officer
                                               (Principal Financial Officer)

Date:   November 14, 2002              By  /s/ Douglas K. Russell
                                          ------------------------------------
                                               Douglas K. Russell
                                               Chief Accounting Officer
                                               (Principal Accounting Officer)

                                       57
<PAGE>
                                  CERTIFICATION

I, Robert I. Lipp, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Travelers Property
      Casualty Corp.;

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

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

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

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

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

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

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

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

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

6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date:  November 14, 2002

                                            /s/ Robert I. Lipp
                                            -------------------------------
                                            Robert I. Lipp
                                            Chief Executive Officer

                                       58
<PAGE>
                                  CERTIFICATION

I, Jay S. Benet, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Travelers Property
      Casualty Corp.;

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

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

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

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

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

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

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

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

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

6.    The registrant's other certifying officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.


Date: November 14, 2002


                               /s/ Jay S. Benet
                               ---------------------------------------
                               Jay S. Benet
                               Chief Financial Officer

                                       59
<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+       Amendment No. 1 to Intercompany Agreement, dated as of August 19,
            2002, amending that certain Intercompany Agreement dated as of March
            26, 2002, by and among Travelers Property Casualty Corp., The
            Travelers Insurance Company and Citigroup Inc.

10.2+       Trademark License Agreement dated as of August 19, 2002, by and
            between Travelers Property Casualty Corp. and The Travelers
            Insurance Company.

10.3+       Transition Services Agreement dated as of August 19, 2002 by and
            between Travelers Property Casualty Corp and Citigroup Inc.

10.4+       Investment Management and Administrative Services Agreement dated as
            of August 6, 2002, between Travelers Insurance Group Holdings, Inc.
            and Citigroup Alternative Investments LLC.

10.5+       Agreement between Travelers Property Casualty Corp. and HPB
            Management LLC dated as of January 1, 2002, and Termination
            Agreement between the parties dated September 24, 2002.

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.

                                       60