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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 March 31, 2003

or

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

For the transition period from
                     to



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Commission file number 001-31266



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Travelers Property Casualty Corp.

(Exact name of registrant as specified in its charter)


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

One Tower Square, Hartford, Connecticut 06183
(Address of principal executive offices)

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



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

Yes [x]      No [  ]


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

Yes [  ]      No [x]


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 April 30, 2003:
|                                              
|Class A                                        |  |  | 506,511,859 | 
|Class B                                        |  |  | 499,927,275 | 





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TABLE OF CONTENTS



|                            |                                                                                               |                                                                                 |  |  |  |  |  | 
|--------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- |  |  |  |  |  | 
|                            |                                                                                               | CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)                         
|                            |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEET                                           
|                            |                                                                                               | CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)
|                            |                                                                                               | CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)                     
|                            |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)               
|                            | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                            | Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                            | Item 4. CONTROLS AND PROCEDURES                                                              
|PART II - OTHER INFORMATION
|                            | Item 1. LEGAL PROCEEDINGS                                                                    
|                            | Item 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                 
|CERTIFICATION              
|EXHIBIT INDEX              
|CERTIFICATION OF CEO       
|CERTIFICATION OF CFO       



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TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

TABLE OF CONTENTS

|                               |  |                                                                                                                     |  |     
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------- |  | ----
|                               |  |                                                                                                                     |  | Page
|                               |  |                                                                                                                     |  |     
|Part I - Financial Information |  |                                                                                                                    
|Item 1.                        |  | Financial Statements:                                                                                               |  |     
|                               |  | Condensed Consolidated Statement of Income (Unaudited) -
Three Months Ended March 31, 2003 and 2002                 |  | 3   
|                               |  | Condensed Consolidated Balance Sheet  March 31, 2003 (Unaudited)
and December 31, 2002                             |  | 4   
|                               |  | Condensed Consolidated Statement of Changes in Shareholders Equity
(Unaudited) - Three Months Ended March 31, 2003 |  | 5   
|                               |  | Condensed Consolidated Statement of Cash Flows (Unaudited) -
Three Months Ended March 31, 2003 and 2002             |  | 6   
|                               |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                    |  | 7   
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations                               |  | 21  
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                          |  | 43  
|Item 4.                        |  | Controls and Procedures                                                                                             |  | 44  
|Part II - Other Information    |  |                                                                                                                    
|Item 1.                        |  | Legal Proceedings                                                                                                   |  | 45  
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                                                    |  | 48  
|Signatures                     |  | 49                                                                                                                 
|Certifications                 |  | 50                                                                                                                 
|Exhibit Index                  |  | 52                                                                                                                 

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TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(in millions, except per share data)


|                                                                                                              |                           |      |         |         |  |   |         |         | 
|------------------------------------------------------------------------------------------------------------- | ------------------------- | ---- | ------- | ------- |  | - | ------- | ------- | 
|For the three months ended March 31,                                                                          |                           | 2003 |         | 2002   
|                                                                                                              |                           |      |         |        
|Revenues                                                                                                      |                           |      |         |         |  |   |         |        
|Premiums                                                                                                      |                           | $    | 2,978.6 |         |  | $ | 2,584.6 |        
|Net investment income                                                                                         |                           |      | 455.9   |         |  |   | 487.8   |        
|Fee income                                                                                                    |                           |      | 136.3   |         |  |   | 102.7   |        
|Realized investment gains, net                                                                                |                           |      | 6.5     |         |  |   | 28.8    |        
|Other revenues                                                                                                |                           |      | 25.7    |         |  |   | 28.8    |        
|                                                                                                              |                           |      |         |         |  |   |         |        
|                                                                                                              | Total revenues            |      |         | 3,603.0 |  |   |         | 3,232.7 | 
|                                                                                                              |                           |      |         |         |  |   |         |        
|Claims and expenses                                                                                           |                           |      |         |         |  |   |         |        
|Claims and claim adjustment expenses                                                                          |                           |      | 2,287.9 |         |  |   | 1,986.1 |        
|Amortization of deferred acquisition costs                                                                    |                           |      | 462.7   |         |  |   | 426.4   |        
|Interest expense                                                                                              |                           |      | 51.7    |         |  |   | 35.8    |        
|General and administrative expenses                                                                           |                           |      | 393.4   |         |  |   | 330.1   |        
|                                                                                                              |                           |      |         |         |  |   |         |        
|                                                                                                              | Total claims and expenses |      |         | 3,195.7 |  |   |         | 2,778.4 | 
|                                                                                                              |                           |      |         |         |  |   |         |        
|Income before federal income taxes, minority interest and
cumulative effect of change in accounting principle |                           |      | 407.3   |         |  |   | 454.3   |        
|Federal income taxes                                                                                          |                           |      | 89.8    |         |  |   | 109.6   |        
|Minority interest, net of tax                                                                                 |                           |      | (22.5   | )       |  |   |        |        
|                                                                                                              |                           |      |         |         |  |   |         |        
|Income before cumulative effect of change in accounting
principle                                             |                           |      | 340.0   |         |  |   | 344.7   |        
|Cumulative effect of change in accounting for goodwill
and other intangible assets, net of tax                |                           |      |        |         |  |   | (242.6  | )      
|                                                                                                              |                           |      |         |         |  |   |         |        
|Net income                                                                                                    |                           | $    | 340.0   |         |  | $ | 102.1   |        
|                                                                                                              |                           |      |         |         |  |   |         |        
|Basic earnings per share                                                                                      |                           |      |         |         |  |   |         |        
|Income before cumulative effect of change in accounting
principle                                             |                           | $    | 0.34    |         |  | $ | 0.43    |        
|Cumulative effect of change in accounting principle                                                           |                           |      |        |         |  |   | (0.30   | )      
|                                                                                                              |                           |      |         |         |  |   |         |        
|Net income                                                                                                    |                           | $    | 0.34    |         |  | $ | 0.13    |        
|                                                                                                              |                           |      |         |         |  |   |         |        
|Weighted average number of common shares outstanding                                                          |                           |      | 1,002.5 |         |  |   | 794.7   |        
|                                                                                                              |                           |      |         |         |  |   |         |        
|Diluted earnings per share                                                                                    |                           |      |         |         |  |   |         |        
|Income before cumulative effect of change in accounting
principle                                             |                           | $    | 0.34    |         |  | $ | 0.43    |        
|Cumulative effect of change in accounting principle                                                           |                           |      |        |         |  |   | (0.30   | )      
|                                                                                                              |                           |      |         |         |  |   |         |        
|Net income                                                                                                    |                           | $    | 0.34    |         |  | $ | 0.13    |        
|                                                                                                              |                           |      |         |         |  |   |         |        
|Weighted average number of common shares outstanding
and common stock equivalents                             |                           |      | 1,007.6 |         |  |   | 794.7   |        
|                                                                                                              |                           |      |         |         |  |   |         |        

See notes to condensed consolidated financial statements.

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TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES




CONDENSED CONSOLIDATED BALANCE SHEET
(in millions, except shares and per share data)


|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          |             |     |              |          |          |     | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | ----------- | --- | ------------ | -------- | -------- | --- | 
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          | March 31,   |     |              |          |         
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          | 2003        |     | December 31,
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          | (Unaudited) |     | 2002        
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          |             |     |             
|Assets                                                                                                                                                                              |                                            |                                                                                                                                                                      |          |             |     |              |          |         
|Fixed maturities, available for sale at fair value (including $2,781.0 and $580.5 subject to
securities lending and repurchase agreements) (amortized cost $29,041.6 and $28,877.8) |                                            | $                                                                                                                                                                    | 30,351.8 |             |     | $            | 30,003.2 |         
|Equity securities, at fair value (cost $798.4 and $861.9)                                                                                                                           |                                            |                                                                                                                                                                      | 810.9    |             |     |              | 851.5    |         
|Mortgage loans                                                                                                                                                                      |                                            |                                                                                                                                                                      | 260.0    |             |     |              | 257.9    |         
|Real estate held for sale                                                                                                                                                           |                                            |                                                                                                                                                                      | 12.5     |             |     |              | 12.5     |         
|Short-term securities                                                                                                                                                               |                                            |                                                                                                                                                                      | 5,548.1  |             |     |              | 4,853.6  |         
|Trading securities, at fair value                                                                                                                                                   |                                            |                                                                                                                                                                      | 42.5     |             |     |              | 40.7     |         
|Other investments                                                                                                                                                                   |                                            |                                                                                                                                                                      | 2,335.2  |             |     |              | 2,405.8  |         
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          |             |     |              |          |         
|                                                                                                                                                                                    | Total investments                          |                                                                                                                                                                      |          | 39,361.0    |     |              |          | 38,425.2 |    
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          |             |     |              |          |         
|Cash                                                                                                                                                                                |                                            |                                                                                                                                                                      | 150.1    |             |     |              | 92.2     |         
|Investment income accrued                                                                                                                                                           |                                            |                                                                                                                                                                      | 357.2    |             |     |              | 339.3    |         
|Premium balances receivable                                                                                                                                                         |                                            |                                                                                                                                                                      | 3,948.6  |             |     |              | 3,861.4  |         
|Reinsurance recoverables                                                                                                                                                            |                                            |                                                                                                                                                                      | 10,953.7 |             |     |              | 10,977.5 |         
|Deferred acquisition costs                                                                                                                                                          |                                            |                                                                                                                                                                      | 890.7    |             |     |              | 873.0    |         
|Deferred federal income taxes                                                                                                                                                       |                                            |                                                                                                                                                                      | 919.7    |             |     |              | 1,447.1  |         
|Contractholder receivables                                                                                                                                                          |                                            |                                                                                                                                                                      | 2,576.2  |             |     |              | 2,544.1  |         
|Goodwill                                                                                                                                                                            |                                            |                                                                                                                                                                      | 2,411.5  |             |     |              | 2,411.5  |         
|Receivables for investment sales                                                                                                                                                    |                                            |                                                                                                                                                                      | 847.3    |             |     |              | 138.7    |         
|Other assets                                                                                                                                                                        |                                            |                                                                                                                                                                      | 2,968.0  |             |     |              | 3,027.5  |         
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          |             |     |              |          |         
|                                                                                                                                                                                    | Total assets                               |                                                                                                                                                                      | $        | 65,384.0    |     |              | $        | 64,137.5 |    
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          |             |     |              |          |         
|Liabilities                                                                                                                                                                         |                                            |                                                                                                                                                                      |          |             |     |              |          |         
|Claims and claim adjustment expense reserves                                                                                                                                        |                                            | $                                                                                                                                                                    | 33,801.0 |             |     | $            | 33,736.0 |         
|Unearned premium reserves                                                                                                                                                           |                                            |                                                                                                                                                                      | 6,675.5  |             |     |              | 6,459.9  |         
|Contractholder payables                                                                                                                                                             |                                            |                                                                                                                                                                      | 2,576.2  |             |     |              | 2,544.1  |         
|Short-term debt                                                                                                                                                                     |                                            |                                                                                                                                                                      | 474.1    |             |     |              |         |         
|Notes payable to former affiliates                                                                                                                                                  |                                            |                                                                                                                                                                      |         |             |     |              | 700.0    |         
|Long-term debt                                                                                                                                                                      |                                            |                                                                                                                                                                      | 1,758.8  |             |     |              | 926.2    |         
|Convertible junior subordinated notes payable                                                                                                                                       |                                            |                                                                                                                                                                      | 868.0    |             |     |              | 867.8    |         
|Convertible notes payable                                                                                                                                                           |                                            |                                                                                                                                                                      | 49.6     |             |     |              | 49.7     |         
|Payables for investment purchases                                                                                                                                                   |                                            |                                                                                                                                                                      | 1,354.7  |             |     |              | 3,737.9  |         
|Payables for securities lending and repurchase agreements                                                                                                                           |                                            |                                                                                                                                                                      | 2,813.5  |             |     |              | 597.9    |         
|Other liabilities                                                                                                                                                                   |                                            |                                                                                                                                                                      | 3,551.9  |             |     |              | 3,480.7  |         
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          |             |     |              |          |         
|                                                                                                                                                                                    | Total liabilities                          |                                                                                                                                                                      |          | 53,923.3    |     |              |          | 53,100.2 |    
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          |             |     |              |          |         
|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, 507.2 million and 504.2 million
issued and outstanding at March 31, 2003 and December 31, 2002, respectively |          |             | 5.1 |              |          |          | 5.0 | 
|                                                                                                                                                                                    |                                            | Class B, $.01 par value, 1.5 billion shares authorized, 500.0 million issued and outstanding                                                                         |          |             | 5.0 |              |          |          | 5.0 | 
|Additional paid-in capital                                                                                                                                                          |                                            |                                                                                                                                                                      | 8,657.9  |             |     |              | 8,618.4  |         
|Retained earnings                                                                                                                                                                   |                                            |                                                                                                                                                                      | 1,159.0  |             |     |              | 880.5    |         
|Accumulated other changes in equity from nonowner sources                                                                                                                           |                                            |                                                                                                                                                                      | 799.0    |             |     |              | 656.6    |         
|Treasury stock, at cost (shares 986,146 and 338,068)                                                                                                                                |                                            |                                                                                                                                                                      | (15.2    | )           |     |              | (4.9     | )       
|Unearned compensation                                                                                                                                                               |                                            |                                                                                                                                                                      | (50.1    | )           |     |              | (23.3    | )       
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          |             |     |              |          |         
|                                                                                                                                                                                    | Total shareholders equity                 |                                                                                                                                                                      |          | 10,560.7    |     |              |          | 10,137.3 |    
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          |             |     |              |          |         
|                                                                                                                                                                                    | Total liabilities and shareholders equity |                                                                                                                                                                      | $        | 65,384.0    |     |              | $        | 64,137.5 |    
|                                                                                                                                                                                    |                                            |                                                                                                                                                                      |          |             |     |              |          |         

See notes to condensed consolidated financial statements.

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TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS EQUITY (Unaudited)
(in millions)


|                                                                               |                            |      |         |          |  |   |          |         | 
|------------------------------------------------------------------------------ | -------------------------- | ---- | ------- | -------- |  | - | -------- | ------- | 
|For the three months ended March 31,                                           |                            | 2003 |         | 2002    
|                                                                               |                            |      |         |         
|Common stock and additional paid in capital                                    |                            |      |         |          |  |   |          |        
|Balance, beginning of period                                                   |                            | $    | 8,628.4 |          |  | $ | 4,440.7  |        
|Net employee stock-based compensation plans                                    |                            |      | 42.7    |          |  |   |         |        
|Net proceeds from initial public offering                                      |                            |      |        |          |  |   | 4,089.5  |        
|Other                                                                          |                            |      | (3.1    | )        |  |   | 17.5     |        
|                                                                               |                            |      |         |          |  |   |          |        
|Balance, end of period                                                         |                            |      | 8,668.0 |          |  |   | 8,547.7  |        
|                                                                               |                            |      |         |          |  |   |          |        
|Retained earnings                                                              |                            |      |         |          |  |   |          |        
|Balance, beginning of period                                                   |                            |      | 880.5   |          |  |   | 6,004.2  |        
|Net income                                                                     |                            |      | 340.0   |          |  |   | 102.1    |        
|Receipts from former subsidiaries                                              |                            |      |        |          |  |   | 157.5    |        
|Dividends                                                                      |                            |      | (61.5   | )        |  |   | (5,252.5 | )      
|                                                                               |                            |      |         |          |  |   |          |        
|Balance, end of period                                                         |                            |      | 1,159.0 |          |  |   | 1,011.3  |        
|                                                                               |                            |      |         |          |  |   |          |        
|Accumulated other changes in equity from nonowner sources,
net of tax          |                            |      |         |          |  |   |          |        
|Balance, beginning of period                                                   |                            |      | 656.6   |          |  |   | 241.4    |        
|Net unrealized gain (loss) on investment securities                            |                            |      | 137.2   |          |  |   | (169.9   | )      
|Other                                                                          |                            |      | 5.2     |          |  |   | 1.1      |        
|                                                                               |                            |      |         |          |  |   |          |        
|Balance, end of period                                                         |                            |      | 799.0   |          |  |   | 72.6     |        
|                                                                               |                            |      |         |          |  |   |          |        
|Treasury stock (at cost)                                                       |                            |      |         |          |  |   |          |        
|Balance, beginning of period                                                   |                            |      | (4.9    | )        |  |   |         |        
|Net employee stock-based compensation plans                                    |                            |      | (10.3   | )        |  |   |         |        
|                                                                               |                            |      |         |          |  |   |          |        
|Balance, end of period                                                         |                            |      | (15.2   | )        |  |   |         |        
|                                                                               |                            |      |         |          |  |   |          |        
|Unearned compensation                                                          |                            |      |         |          |  |   |          |        
|Balance, beginning of period                                                   |                            |      | (23.3   | )        |  |   |         |        
|Net issuance of restricted stock under employee
stock-based compensation plans |                            |      | (33.2   | )        |  |   |         |        
|Restricted stock amortization                                                  |                            |      | 6.4     |          |  |   |         |        
|                                                                               |                            |      |         |          |  |   |          |        
|Balance, end of period                                                         |                            |      | (50.1   | )        |  |   |         |        
|                                                                               |                            |      |         |          |  |   |          |        
|                                                                               | Total shareholders equity |      | $       | 10,560.7 |  |   | $        | 9,631.6 | 
|                                                                               |                            |      |         |          |  |   |          |        
|Common shares outstanding                                                      |                            |      |         |          |  |   |          |        
|Balance, beginning of period                                                   |                            |      | 1,003.9 |          |  |   | 769.0    |        
|Shares issued in Initial Public Offering                                       |                            |      |        |          |  |   | 231.0    |        
|Net shares issued for employee stock based compensation
plans                  |                            |      | 2.3     |          |  |   |         |        
|                                                                               |                            |      |         |          |  |   |          |        
|                                                                               | Balance, end of period     |      |         | 1,006.2  |  |   |          | 1,000.0 | 
|                                                                               |                            |      |         |          |  |   |          |        

See notes to condensed consolidated financial statements.

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TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(in millions)


|                                                                                  |                                                                   |      |          |          |   |   |          |          |  
|--------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ---- | -------- | -------- | - | - | -------- | -------- | -
|For the three months ended March 31,                                              |                                                                   | 2003 |          | 2002    
|                                                                                  |                                                                   |      |          |         
|Cash flows from operating activities                                              |                                                                   |      |          |          |   |   |          |         
|Net income                                                                        |                                                                   | $    | 340.0    |          |   | $ | 102.1    |         
|Adjustments to reconcile net income to net cash provided by operating
activities: |                                                                   |      |          |          |   |   |          |         
|                                                                                  | Realized investment gains                                         |      |          | (6.5     | ) |   |          | (28.8    | )
|                                                                                  | Cumulative effect of changes in accounting principles, net of tax |      |          |         |   |   |          | 242.6    |  
|                                                                                  | Depreciation and amortization                                     |      |          | 10.3     |   |   |          | 9.8      |  
|                                                                                  | Deferred federal income taxes                                     |      |          | 453.6    |   |   |          | (2.2     | )
|                                                                                  | Amortization of deferred policy acquisition costs                 |      |          | 462.7    |   |   |          | 426.4    |  
|                                                                                  | Premium balances receivable                                       |      |          | (87.2    | ) |   |          | (89.4    | )
|                                                                                  | Reinsurance recoverables                                          |      |          | 23.8     |   |   |          | (87.5    | )
|                                                                                  | Deferred acquisition costs                                        |      |          | (480.4   | ) |   |          | (442.7   | )
|                                                                                  | Insurance reserves                                                |      |          | 280.6    |   |   |          | 290.3    |  
|                                                                                  | Trading account activities                                        |      |          | (1.8     | ) |   |          | (28.5    | )
|                                                                                  | Recoveries from former affiliate                                  |      |          | 360.7    |   |   |          |         |  
|                                                                                  | Other                                                             |      |          | (463.1   | ) |   |          | (136.8   | )
|                                                                                  |                                                                   |      |          |          |   |   |          |         
|Net cash provided by operating activities                                         |                                                                   |      | 892.7    |          |   |   | 255.3    |         
|                                                                                  |                                                                   |      |          |          |   |   |          |         
|Cash flows from investing activities                                              |                                                                   |      |          |          |   |   |          |         
|Proceeds from maturities of investments                                           |                                                                   |      |          |          |   |   |          |         
|                                                                                  | Fixed maturities                                                  |      |          | 915.3    |   |   |          | 614.7    |  
|                                                                                  | Mortgage loans                                                    |      |          | 3.6      |   |   |          | 2.1      |  
|Proceeds from sales of investments                                                |                                                                   |      |          |          |   |   |          |         
|                                                                                  | Fixed maturities                                                  |      |          | 5,273.7  |   |   |          | 3,126.4  |  
|                                                                                  | Equity securities                                                 |      |          | 70.2     |   |   |          | 48.6     |  
|Purchases of investments                                                          |                                                                   |      |          |          |   |   |          |         
|                                                                                  | Fixed maturities                                                  |      |          | (6,322.1 | ) |   |          | (3,410.7 | )
|                                                                                  | Equity securities                                                 |      |          | (2.9     | ) |   |          | (87.6    | )
|                                                                                  | Mortgage loans                                                    |      |          | (4.9     | ) |   |          |         |  
|Short-term securities, (purchases) sales, net                                     |                                                                   |      | (694.5   | )        |   |   | (295.0   | )       
|Other investments, net                                                            |                                                                   |      | 45.1     |          |   |   | 356.8    |         
|Securities transactions in course of settlement                                   |                                                                   |      | (646.1   | )        |   |   | (131.9   | )       
|                                                                                  |                                                                   |      |          |          |   |   |          |         
|Net cash provided by (used in) investing activities                               |                                                                   |      | (1,362.6 | )        |   |   | 223.4    |         
|                                                                                  |                                                                   |      |          |          |   |   |          |         
|Cash flows from financing activities                                              |                                                                   |      |          |          |   |   |          |         
|Issuance of short-term debt                                                       |                                                                   |      | 549.5    |          |   |   |         |         
|Repurchase of short-term debt                                                     |                                                                   |      | (75.0    | )        |   |   |         |         
|Issuance of long-term debt                                                        |                                                                   |      | 1,381.9  |          |   |   |         |         
|Payment of long-term debt                                                         |                                                                   |      | (550.0   | )        |   |   |         |         
|Issuance of convertible notes, net                                                |                                                                   |      |         |          |   |   | 867.0    |         
|Payment of note payables to former affiliate                                      |                                                                   |      | (700.0   | )        |   |   | (5,149.0 | )       
|Initial public offering                                                           |                                                                   |      |         |          |   |   | 4,089.5  |         
|Issuance of common stock-employee stock options                                   |                                                                   |      | 8.2      |          |   |   |         |         
|Treasury stock acquired                                                           |                                                                   |      | (2.3     | )        |   |   |         |         
|Receipts from former affiliates                                                   |                                                                   |      |         |          |   |   | 157.5    |         
|Dividends to shareholders                                                         |                                                                   |      | (60.5    | )        |   |   |         |         
|Dividend to former affiliate                                                      |                                                                   |      |         |          |   |   | (157.5   | )       
|Payment of dividend on subsidiarys preferred stock                               |                                                                   |      | (1.3     | )        |   |   |         |         
|Purchase of real estate from former affiliate                                     |                                                                   |      |         |          |   |   | (68.2    | )       
|Transfer of employee benefit obligations to former affiliates                     |                                                                   |      | (22.7    | )        |   |   | (172.4   | )       
|Transfer of lease obligations to former affiliate                                 |                                                                   |      |         |          |   |   | (87.8    | )       
|                                                                                  |                                                                   |      |          |          |   |   |          |         
|Net cash provided by (used in) financing activities                               |                                                                   |      | 527.8    |          |   |   | (520.9   | )       
|                                                                                  |                                                                   |      |          |          |   |   |          |         
|Net increase (decrease) in cash                                                   |                                                                   |      | 57.9     |          |   |   | (42.2    | )       
|Cash at beginning of period                                                       |                                                                   |      | 92.2     |          |   |   | 236.9    |         
|                                                                                  |                                                                   |      |          |          |   |   |          |         
|Cash at end of period                                                             |                                                                   | $    | 150.1    |          |   | $ | 194.7    |         
|                                                                                  |                                                                   |      |          |          |   |   |          |         
|Supplemental disclosure of cash flow information                                  |                                                                   |      |          |          |   |   |          |         
|Income taxes (received) paid                                                      |                                                                   | $    | 36.8     |          |   | $ | (21.0    | )       
|Interest paid                                                                     |                                                                   | $    | 42.3     |          |   | $ | 6.0      |         
|                                                                                  |                                                                   |      |          |          |   |   |          |         

See notes to condensed consolidated financial statements

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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 included in the
Companys Form 10-K for the year ended December 31, 2002.                                                                                                                                                                                                             
|  
|   |  | Certain financial information that is normally included in annual financial
statements prepared in accordance with GAAP, but that is not required for
interim reporting purposes, has been condensed or omitted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|2. |  | CHANGES IN ACCOUNTING PRINCIPLES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | The Company has an employee stock incentive compensation plan (the plan) that
includes stock option programs and restricted stock programs, which are
described more fully in the notes to the consolidated financial statements
included in the Companys Form 10-K for the year ended December 31, 2002.
Prior to January 1, 2003, the Company accounted for the plan under the
recognition and measurement principles of Accounting Principles Board Opinion
No. 25 (APB 25), Accounting for Stock Issued to Employees, and related
interpretations. Under APB 25 the restricted stock awards are valued based
upon their fair value at the date of issuance and charged to compensation
expense ratably over the vesting period. Options granted prior to January 1,
2003 were not reflected in compensation expense as all options granted had an
exercise price equal to the market value of the underlying common stock on
the date of grant.
|  
|   |  | Effective January 1, 2003,
the Company elected to adopt the fair value method of
accounting for its employee stock-based compensation plans as defined in the
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (FAS 123),
prospectively for all employee awards granted, modified, or settled after
January 1, 2003. Under this method, compensation cost is
measured at the grant date based on the value of the award and is
recognized over the vesting period. The adoption of FAS 123 did not have a significant impact
on the Companys results of operations, financial condition or liquidity.                                                                                                                                                                                                                                                      
|  
|   |  | The following table illustrates the effect on net income and earnings per
share as if the fair value based method had been applied to all outstanding
and unvested awards in each period:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                                                                                                                          |  |      |       |      |  |   |       |  
|------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ----- | -
|(for the three months ended March 31, in millions )                                                                       |  | 2003 |       | 2002
|                                                                                                                          |  |      |       |     
|Net income, as reported                                                                                                   |  | $    | 340.0 |      |  | $ | 102.1 |  
|Add: Stock-based employee compensation expense included in reported
net income, net of related tax effects                |  |      | 4.3   |      |  |   | 4.7   |  
|Deduct:
Stockbased employee compensation expense determined
under fair value based method, net of related tax effects(1) |  |      | (18.0 | )    |  |   | (14.7 | )
|                                                                                                                          |  |      |       |      |  |   |       |  
|Net income, pro forma                                                                                                     |  | $    | 326.3 |      |  | $ | 92.1  |  
|                                                                                                                          |  |      |       |      |  |   |       |  
|Earnings per share                                                                                                        |  |      |       |      |  |   |       |  
|Basic and diluted  as reported                                                                                           |  | $    | 0.34  |      |  | $ | 0.13  |  
|Basic  pro forma                                                                                                         |  |      | 0.33  |      |  |   | 0.12  |  
|Diluted  pro forma                                                                                                       |  |      | 0.32  |      |  |   | 0.12  |  
|                                                                                                                          |  |      |       |      |  |   |       |  



| |  | (1) First quarter 2002 includes the fair value of stock-based employee
compensation in Citigroups common stock. The awards in Citigroup
shares were replaced with the Companys class A common shares in August
2002.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|2. |  | CHANGES IN ACCOUNTING PRINCIPLES, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Business Combinations, Goodwill
and Other Intangible Assets

Effective January 1, 2002, the Company adopted 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | 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 March 31, 2003 and December 31, 2002, and
with accumulated amortization of $99.7 million and $90.8 million as of March
31, 2003 and December 31, 2002, respectively, which are included in other
assets in the condensed consolidated balance sheet. Amortization expense was
$8.9 million for each of the three months ended March 31, 2003 and 2002.
Intangible assets amortization expense is estimated to be $26.5 million for
the remainder of 2003, $34.2 million in 2004, $31.3 million in 2005 and $29.6
million in each of 2006, 2007 and 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|3. |  | ACCOUNTING STANDARDS NOT YET ADOPTED                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | Consolidation of Variable
Interest Entities

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN 46). FIN 46 clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, to
certain entities in which equity investors do not have the characteristics of
a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated
financial support from other parties. It separates entities into two groups:
(1) those for which voting interests are used to determine consolidation and
(2) those for which variable interests are used to determine consolidation
(the subject of FIN 46). FIN 46 clarifies how to identify a variable
interest entity and how to determine when a business enterprise should
include the assets, liabilities, noncontrolling interests and results of
activities of a variable interest entity in its consolidated financial
statements. FIN 46 is effective immediately for variable interest entities
created after January 31, 2003. It also applies to interim periods beginning
after June 15, 2003 for variable interest entities acquired before February
1, 2003. If it is reasonably possible that an enterprise will consolidate or
disclose information about a variable interest entity when FIN 46 becomes
effective, the enterprise is required to disclose in all financial statements
issued after January 31, 2003, the nature, purpose, size and activities of
the variable interest entity and the enterprises maximum exposure to loss as
a result of its involvement with the variable interest entity.

8



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|3. |  | ACCOUNTING STANDARDS NOT YET ADOPTED, Continued                                                                                                                                                                                                                                                                                                                                                                                   
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company has not acquired any variable interest entities subsequent to
January 31, 2003. For purposes of applying FIN 46, the Company will evaluate
the following investments which were acquired or created prior to February 1,
2003 to determine whether such investments should be consolidated or
disclosed as variable interest entities in the Companys future financial
statements (amounts are as of March 31, 2003):



| |  |  | Real estate partnerships and joint ventures that are accounted
for under the equity method of accounting and have a total carrying
value of $253.1 million on the consolidated balance sheet; the
Companys unfunded commitments associated with real estate
partnerships and joint ventures were $88.5 million.                                             
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Investment partnerships that are accounted for under the equity
method of accounting and have a carrying value of $985.1 million on
the consolidated balance sheet; the Companys unfunded commitments
associated with investment partnerships were $641.7 million.                                                                                          
|
| |  |  | Below investment grade asset-backed securities and commercial
mortgage-backed securities that are reported at fair value and have a
carrying value of $126.2 million on the consolidated balance sheet.                                                                                                                                                      
|
| |  |  | Equity investments that are reported at fair value and have a
carrying value of $30.5 million on the balance sheet and private
equity investments that are accounted for under the equity method of
accounting and have a carrying value of $311.1 million on the balance
sheet. There were no unfunded commitments associated with these
equity investments.



| |  | The Company is currently assessing the impact, if any, that the consolidation
provisions of FIN 46 may have on the consolidated financial statements.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|

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|  
|--
|4.

|                                                          |                |       |            |         |          |          |            |           |         |         |              |         |          |   |         |     |  |   |          |         | 
|--------------------------------------------------------- | -------------- | ----- | ---------- | ------- | -------- | -------- | ---------- | --------- | ------- | ------- | ------------ | ------- | -------- | - | ------- | --- |  | - | -------- | ------- | 
|                                                          |                |       |            |         |          |          |            |           |         |         | Total        |         | Interest
|                                                          |                |       | Commercial |         | Personal |          | Reportable |           | Expense |         | Consolidated
|(at and for the three months ended March 31, in millions) |                | Lines |            | Lines   |          | Segments |            | and Other |         | Amounts
|                                                          |                |       |            |         |          |          |            |           |         |        
|2003                                                      |                |       |            |         |          |          |            |           |         |         |              |        
|Revenues                                                  |                |       |            |         |          |          |            |           |         |         |              |        
|Premiums                                                  |                | $     | 1,840.3    |         |          | $        | 1,138.3    |           |         | $       | 2,978.6      |         |          | $ |        |     |  | $ | 2,978.6  |        
|Net investment income                                     |                |       | 365.7      |         |          |          | 89.4       |           |         |         | 455.1        |         |          |   | .8      |     |  |   | 455.9    |        
|Fee income                                                |                |       | 136.3      |         |          |          |           |           |         |         | 136.3        |         |          |   |        |     |  |   | 136.3    |        
|Realized investment gains (losses), net                   |                |       | 14.5       |         |          |          | (8.0       | )         |         |         | 6.5          |         |          |   |        |     |  |   | 6.5      |        
|Other revenues                                            |                |       | 3.3        |         |          |          | 21.6       |           |         |         | 24.9         |         |          |   | .8      |     |  |   | 25.7     |        
|                                                          |                |       |            |         |          |          |            |           |         |         |              |         |          |   |         |     |  |   |          |        
|                                                          | Total revenues |       | $          | 2,360.1 |          |          | $          | 1,241.3   |         |         | $            | 3,601.4 |          |   | $       | 1.6 |  |   | $        | 3,603.0 | 
|                                                          |                |       |            |         |          |          |            |           |         |         |              |         |          |   |         |     |  |   |          |        
|Operating
income (loss)(1)                                |                | $     | 260.9      |         |          | $        | 112.5      |           |         | $       | 373.4        |         |          | $ | (34.9   | )   |  | $ | 338.5    |        
|Assets                                                    |                |       | 55,089.8   |         |          |          | 9,044.1    |           |         |         | 64,133.9     |         |          |   | 1,250.1 |     |  |   | 65,384.0 |        
|                                                          |                |       |            |         |          |          |            |           |         |         |              |         |          |   |         |     |  |   |          |        
|2002                                                      |                |       |            |         |          |          |            |           |         |         |              |         |          |   |         |     |  |   |          |        
|Revenues                                                  |                |       |            |         |          |          |            |           |         |         |              |        
|Premiums                                                  |                | $     | 1,554.6    |         |          | $        | 1,030.0    |           |         | $       | 2,584.6      |         |          | $ |        |     |  | $ | 2,584.6  |        
|Net investment income                                     |                |       | 382.4      |         |          |          | 104.3      |           |         |         | 486.7        |         |          |   | 1.1     |     |  |   | 487.8    |        
|Fee income                                                |                |       | 102.7      |         |          |          |           |           |         |         | 102.7        |         |          |   |        |     |  |   | 102.7    |        
|Realized investment gains (losses), net                   |                |       | 40.5       |         |          |          | (12.0      | )         |         |         | 28.5         |         |          |   | .3      |     |  |   | 28.8     |        
|Other revenues                                            |                |       | 7.7        |         |          |          | 21.1       |           |         |         | 28.8         |         |          |   |        |     |  |   | 28.8     |        
|                                                          |                |       |            |         |          |          |            |           |         |         |              |         |          |   |         |     |  |   |          |        
|                                                          | Total revenues |       | $          | 2,087.9 |          |          | $          | 1,143.4   |         |         | $            | 3,231.3 |          |   | $       | 1.4 |  |   | $        | 3,232.7 | 
|                                                          |                |       |            |         |          |          |            |           |         |         |              |         |          |   |         |     |  |   |          |        
|Operating
income (loss)(1)                                |                | $     | 277.6      |         |          | $        | 71.2       |           |         | $       | 348.8        |         |          | $ | (22.2   | )   |  | $ | 326.6    |        
|Assets                                                    |                |       | 48,889.8   |         |          |          | 8,479.7    |           |         |         | 57,369.5     |         |          |   | 576.5   |     |  |   | 57,946.0 |        
|                                                          |                |       |            |         |          |          |            |           |         |         |              |         |          |   |         |     |  |   |          |        



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

Business Segment Reconciliation

|                                                                                               |                               |      |       |       |  |   |        |       | 
|---------------------------------------------------------------------------------------------- | ----------------------------- | ---- | ----- | ----- |  | - | ------ | ----- | 
|(for the three months ended March 31, in millions)                                             |                               | 2003 |       | 2002 
|                                                                                               |                               |      |       |      
|Income reconciliation, net of tax and minority
interest                                        |                               |      |       |       |  |   |        |      
|Total operating income for reportable segments                                                 |                               | $    | 373.4 |       |  | $ | 348.8  |      
|Other operating loss (2)                                                                       |                               |      | (34.9 | )     |  |   | (22.2  | )    
|                                                                                               |                               |      |       |       |  |   |        |      
|                                                                                               | Total operating income        |      |       | 338.5 |  |   |        | 326.6 | 
|Realized investment gains, net                                                                 |                               |      | 1.5   |       |  |   | 18.9   |      
|Restructuring charge                                                                           |                               |      |      |       |  |   | (.8    | )    
|Cumulative effect of change in accounting for goodwill
and other intangible assets, net of tax |                               |      |      |       |  |   | (242.6 | )    
|                                                                                               |                               |      |       |       |  |   |        |      
|                                                                                               | Total consolidated net income |      | $     | 340.0 |  |   | $      | 102.1 | 
|                                                                                               |                               |      |       |       |  |   |        |      



|(2) |  | The primary component of the other operating loss is after-tax
interest expense of $32.8 million and $22.9 million for the three
months ended March 31, 2003 and 2002, respectively.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|5. |  | INVESTMENTS
|-- |  | -----------

The amortized cost and fair value of investments in fixed maturities
classified as available for sale were as
follows:

|                                                                                                    |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |          | 
|--------------------------------------------------------------------------------------------------- | ----- | ---- | --------- | -------- |  | ------ | ---------------- | ------- |  | - | ----- | ----- |  | - | -------- | -------- | 
|                                                                                                    |       |      |           |          |  |        | Gross Unrealized |         |  |   |      
|                                                                                                    |       |      | Amortized |          |  |        | Fair            
|(at March 31, 2003, in millions)                                                                    |       | Cost |           | Gains    |  | Losses |                  | Value  
|                                                                                                    |       |      |           |          |  |        |                  |        
|Mortgage-backed securities - CMOs and
pass-through securities                                       |       | $    | 8,283.1   |          |  | $      | 323.6            |         |  | $ | 4.8   |       |  | $ | 8,601.9  |         
|U.S. Treasury securities and obligations of
U.S. Government and government agencies and
authorities |       |      | 1,003.1   |          |  |        | 59.0             |         |  |   |      |       |  |   | 1,062.1  |         
|Obligations of states, municipalities and
political subdivisions                                    |       |      | 13,248.0  |          |  |        | 676.2            |         |  |   | 14.6  |       |  |   | 13,909.6 |         
|Debt securities issued by foreign
governments                                                       |       |      | 292.5     |          |  |        | 19.3             |         |  |   | 3.3   |       |  |   | 308.5    |         
|All other corporate bonds                                                                           |       |      | 5,964.0   |          |  |        | 395.7            |         |  |   | 135.3 |       |  |   | 6,224.4  |         
|Redeemable preferred stock                                                                          |       |      | 250.9     |          |  |        | 7.0              |         |  |   | 12.6  |       |  |   | 245.3    |         
|                                                                                                    |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |         
|                                                                                                    | Total |      | $         | 29,041.6 |  |        | $                | 1,480.8 |  |   | $     | 170.6 |  |   | $        | 30,351.8 | 
|                                                                                                    |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |         

|                                                                                                    |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |          | 
|--------------------------------------------------------------------------------------------------- | ----- | ---- | --------- | -------- |  | ------ | ---------------- | ------- |  | - | ----- | ----- |  | - | -------- | -------- | 
|                                                                                                    |       |      |           |          |  |        | Gross Unrealized |         |  |   |      
|                                                                                                    |       |      | Amortized |          |  |        | Fair            
|(at December 31, 2002, in millions)                                                                 |       | Cost |           | Gains    |  | Losses |                  | Value  
|                                                                                                    |       |      |           |          |  |        |                  |        
|Mortgage-backed securities - CMOs and
pass-through securities                                       |       | $    | 8,595.4   |          |  | $      | 346.6            |         |  | $ | 1.5   |       |  | $ | 8,940.5  |         
|U.S. Treasury securities and obligations of
U.S. Government and government agencies and
authorities |       |      | 1,034.8   |          |  |        | 62.0             |         |  |   |      |       |  |   | 1,096.8  |         
|Obligations of states, municipalities and
political subdivisions                                    |       |      | 12,664.4  |          |  |        | 631.9            |         |  |   | 10.3  |       |  |   | 13,286.0 |         
|Debt securities issued by foreign
governments                                                       |       |      | 258.2     |          |  |        | 19.9             |         |  |   | 1.7   |       |  |   | 276.4    |         
|All other corporate bonds                                                                           |       |      | 6,093.9   |          |  |        | 342.8            |         |  |   | 245.8 |       |  |   | 6,190.9  |         
|Redeemable preferred stock                                                                          |       |      | 231.1     |          |  |        | 5.6              |         |  |   | 24.1  |       |  |   | 212.6    |         
|                                                                                                    |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |         
|                                                                                                    | Total |      | $         | 28,877.8 |  |        | $                | 1,408.8 |  |   | $     | 283.4 |  |   | $        | 30,003.2 | 
|                                                                                                    |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |         

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

|                                    |       |      |           |       |  |        |                  |       |  |   |      |      |  |   |       |       | 
|----------------------------------- | ----- | ---- | --------- | ----- |  | ------ | ---------------- | ----- |  | - | ---- | ---- |  | - | ----- | ----- | 
|                                    |       |      |           |       |  |        | Gross Unrealized |       |  |   |     
|                                    |       |      | Amortized |       |  |        | Fair            
|(at March 31, 2003, in millions)    |       | Cost |           | Gains |  | Losses |                  | Value
|                                    |       |      |           |       |  |        |                  |      
|Common stocks                       |       | $    | 60.2      |       |  | $      | 6.2              |       |  | $ | 12.8 |      |  | $ | 53.6  |      
|Nonredeemable preferred
stocks      |       |      | 738.2     |       |  |        | 44.0             |       |  |   | 24.9 |      |  |   | 757.3 |      
|                                    |       |      |           |       |  |        |                  |       |  |   |      |      |  |   |       |      
|                                    | Total |      | $         | 798.4 |  |        | $                | 50.2  |  |   | $    | 37.7 |  |   | $     | 810.9 | 
|                                    |       |      |           |       |  |        |                  |       |  |   |      |      |  |   |       |      
|(at
December 31, 2002, in millions) |       |      |           |       |  |        |                  |       |  |   |      |      |  |   |       |      
|Common stocks                       |       | $    | 57.4      |       |  | $      | 4.0              |       |  | $ | 11.3 |      |  | $ | 50.1  |      
|Nonredeemable preferred
stocks      |       |      | 804.5     |       |  |        | 24.6             |       |  |   | 27.7 |      |  |   | 801.4 |      
|                                    |       |      |           |       |  |        |                  |       |  |   |      |      |  |   |       |      
|                                    | Total |      | $         | 861.9 |  |        | $                | 28.6  |  |   | $    | 39.0 |  |   | $     | 851.5 | 
|                                    |       |      |           |       |  |        |                  |       |  |   |      |      |  |   |       |      

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|5. |  | INVESTMENTS, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Securities Lending and Dollar-Roll Repurchase Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | The Company engages in securities lending activities from which it generates
net investment income from the lending of certain of its
investments to other institutions for short periods of time. The Company
either receives cash or marketable securities as collateral equal to at least
the market value of the loaned securities plus accrued interest. Collateral
is marked to market and adjusted daily. In those cases where cash collateral
is received, the Company reinvests the collateral in a short-term investment
pool, the loaned securities remain a recorded asset of the Company and a
liability is recorded to recognize the Companys obligation to return the
collateral at the end of the loan. At March 31, 2003, $559.8 million of
securities were on loan for which cash collateral was received. Where
marketable securities have been received as collateral, the collateral is
held by a third party custodian (tri-party lending agreement), and the
Company has the right to access the collateral only in the event that the
institution borrowing the Companys securities is in default under the
lending agreement. The loaned securities remain a recorded asset of the
Company, and the Company does not recognize the collateral or the obligation
to return the collateral. At March 31, 2003, $269.0 million of securities
were on loan under tri-party lending agreements.
|  
|   |  | The Company also engages in
dollar-roll repurchase activities from which it generates net
investment income from selling mortgage-backed securities and
simultaneously agreeing to repurchase from the same party substantially the
same securities. The Company invests the proceeds from the sale in a
short-term investment pool, the sold securities remain a recorded asset of
the Company and a liability is recorded to recognize the Companys obligation
to repurchase substantially the same securities at the end of a specified
period. At March 31, 2003, $2.221 billion of securities were subject to
dollar-roll repurchase agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|6. |  | CHANGES IN EQUITY FROM NONOWNER SOURCES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | The Companys total changes in equity from nonowner sources are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|                                                                |                                               |      |       |       |  |   |        |       |  
|--------------------------------------------------------------- | --------------------------------------------- | ---- | ----- | ----- |  | - | ------ | ----- | -
|(for the three months ended March 31, in millions)              |                                               | 2003 |       | 2002 
|                                                                |                                               |      |       |      
|Net income                                                      |                                               | $    | 340.0 |       |  | $ | 102.1  |      
|Net unrealized gain (loss) on investment securities, net of
tax |                                               |      | 137.2 |       |  |   | (169.9 | )    
|Other, net of tax (1)                                           |                                               |      | 5.2   |       |  |   | 1.1    |      
|                                                                |                                               |      |       |       |  |   |        |      
|                                                                | Total changes in equity from nonowner sources |      | $     | 482.4 |  |   | $      | (66.7 | )
|                                                                |                                               |      |       |       |  |   |        |      

| |  |                                                                                                     
| |  | ----------------------------------------------------------------------------------------------------
| |  | (1)
Includes foreign currency translation adjustments and changes in fair
value of future contracts.

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|7. |  | EARNINGS PER SHARE (EPS)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Basic EPS is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding 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 Stock Incentive Plan. Excluded from the computation
of diluted EPS were 38.6 million of potentially dilutive shares related to
convertible junior subordinated notes because the contingency conditions for
their issuance have not been satisfied (see note 8 of the Companys Form 10-K
for the year ended December 31, 2002). For the three months ended March 31,
2003 and 2002, there was no significant effect on EPS from potentially
dilutive securities. For the quarter ended March 31, 2002, shares have been
adjusted to give effect to the recapitalization in March 2002, prior to the
Companys March 2002 Initial Public Offering, whereby the outstanding shares
of common stock (1,500 shares) were changed into 269.0 million shares of
class A common stock and 500.0 million shares of class B common stock.
|  
|   |  | The following is a reconciliation of the income and share data used in the
basic and diluted earnings per share computations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                                                                                            |  |      |         |      |  |   |        |  
|------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------ | -
|(For the three months ended March 31, in millions,                                          |  |      |         |      |  |   |        |  
|except per share amounts)                                                                   |  | 2003 |         | 2002
|                                                                                            |  |      |         |     
|Income before cumulative effect of accounting
changes                                       |  | $    | 340.0   |      |  | $ | 344.7  |  
|Cumulative effect of change in accounting principle                                         |  |      |        |      |  |   | (242.6 | )
|                                                                                            |  |      |         |      |  |   |        |  
|Net income available to common shareholders for
basic EPS (numerator)                       |  |      | 340.0   |      |  |   | 102.1  |  
|Effect of dilutive securities                                                               |  |      |        |      |  |   |       |  
|                                                                                            |  |      |         |      |  |   |        |  
|Net income available to common shareholders for
diluted EPS (numerator)                     |  | $    | 340.0   |      |  | $ | 102.1  |  
|                                                                                            |  |      |         |      |  |   |        |  
|Weighted average common shares outstanding
applicable
to basic EPS (denominator)            |  |      | 1,002.5 |      |  |   | 794.7  |  
|Effect of dilutive shares                                                                   |  |      | 5.1     |      |  |   |       |  
|                                                                                            |  |      |         |      |  |   |        |  
|Adjusted weighted average common shares outstanding
applicable to diluted EPS (denominator) |  |      | 1,007.6 |      |  |   | 794.7  |  
|                                                                                            |  |      |         |      |  |   |        |  
|Basic and diluted earnings per share                                                        |  |      |         |      |  |   |        |  
|Income before cumulative effect of accounting
changes                                       |  | $    | 0.34    |      |  | $ | 0.43   |  
|Cumulative effect of accounting changes                                                     |  |      |        |      |  |   | (0.30  | )
|                                                                                            |  |      |         |      |  |   |        |  
|Net income                                                                                  |  | $    | 0.34    |      |  | $ | 0.13   |  
|                                                                                            |  |      |         |      |  |   |        |  

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|8. |  | CAPITAL AND DEBT                                                         
|-- |  | -------------------------------------------------------------------------
|  
|   |  | Long-term debt and convertible notes payable outstanding were as follows:

|                                                     |       |      |           |         |              |   |         |         | 
|---------------------------------------------------- | ----- | ---- | --------- | ------- | ------------ | - | ------- | ------- | 
|                                                     |       |      | March 31, |         | December 31,
|(in millions)                                        |       | 2003 |           | 2002   
|                                                     |       |      |           |        
|Floating rate note due 2004, prepaid February 2003   |       | $    |          |         |              | $ | 550.0   |        
|6.75% Notes due 2006                                 |       |      | 150.0     |         |              |   | 150.0   |        
|3.75% Notes due 2008                                 |       |      | 400.0     |         |              |   |        |        
|7.81% Notes various due dates through 2011           |       |      | 27.0      |         |              |   | 27.0    |        
|5.00% Notes due 2013                                 |       |      | 500.0     |         |              |   |        |        
|7.75% Notes due 2026                                 |       |      | 200.0     |         |              |   | 200.0   |        
|6.375% Notes due 2033                                |       |      | 500.0     |         |              |   |        |        
|4.50% Convertible junior subordinated notes due
2032 |       |      | 892.5     |         |              |   | 892.5   |        
|6.00% Convertible notes payable due 2032             |       |      | 49.6      |         |              |   | 49.7    |        
|                                                     |       |      |           |         |              |   |         |        
|                                                     |       |      | 2,719.1   |         |              |   | 1,869.2 |        
|Debt issuance costs                                  |       |      | 42.7      |         |              |   | 25.5    |        
|                                                     |       |      |           |         |              |   |         |        
|                                                     | Total |      | $         | 2,676.4 |              |   | $       | 1,843.7 | 
|                                                     |       |      |           |         |              |   |         |        



| |  | In December 2002, the Company entered into a loan agreement with an
unaffiliated lender and borrowed $550.0 million under a Promissory Note due
in January 2004. The Promissory Note carried a variable interest rate of
LIBOR plus 25 basis points per annum. On February 5, 2003, the Company
issued $550.0 million of Floating Rate Notes due in February 2004, which is
included in short-term debt in the condensed consolidated balance sheet. The
proceeds from these notes were used to prepay the $550.0 million due on the
Promissory Note. The Floating Rate Notes also carry a variable interest rate
of LIBOR plus 25 basis points per annum. On March 14, 2003, the Company
repurchased $75.0 million of the Floating Rate Notes at par plus accrued
interest. The remaining $475.0 million are callable by the Company after
August 5, 2003.                                                                                                                                                                                                                  
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On March 11, 2003, TPC issued $1.4 billion of senior notes comprised of
$400.0 million of 3.75% senior notes due March 15, 2008, $500.0 million of
5.00% senior notes due March 15, 2013 and $500.0 million of 6.375% senior
notes due March 15, 2033. The notes pay interest semi-annually on March 15
and September 15 of each year, beginning September 15, 2003, are senior
unsecured obligations and rank equally with all of TPCs other senior
unsecured indebtedness. TPC may redeem some or all of the notes prior to
maturity by paying a make-whole premium based on U.S. Treasury rates. The
net proceeds from the sale of these notes were contributed to its primary
subsidiary, Travelers Insurance Group Holdings, Inc. (TIGHI), so that TIGHI
could repay $500.0 million of indebtedness to Citigroup and to redeem $900.0
million aggregate principal amount of TIGHIs junior subordinated debt
securities held by subsidiary trusts. These trusts, in turn, used these
funds to redeem $900.0 million of preferred capital securities on April 9,
2003.
|
| |  | These senior notes were sold to qualified institutional buyers as defined
under Rule 144A under the Securities Act of 1933 (the Securities Act) and
outside the United States in reliance on Regulation S under the Securities
Act. Accordingly, the notes (the restricted notes) were not registered under
the Securities Act or any state securities laws and could not be transferred
or resold except pursuant to certain exemptions. As part of this offering,
TPC agreed to file a registration statement under the Securities Act to
permit the exchange of the notes for registered notes (the Exchange Notes)
having terms identical to those of the senior notes described above (Exchange
Offer). On April 14, 2003, TPC initiated the Exchange Offer pursuant to a
Form S-4 that was filed with the Securities and Exchange Commission.
Accordingly, each series of Exchange Notes has been registered under the
Securities Act, and the transfer restrictions and registration rights
relating to the restricted notes do not apply to the Exchange Notes.      

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|8. |  | CAPITAL AND DEBT, Continued                                                                                                                                                                                  
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Effective April 17, 2003, TPC entered into the following line of credit
agreements with Citibank, a subsidiary of Citigroup Inc. (together with its
consolidated subsidiaries, Citigroup), its former parent:



| |  |  | A $250.0 million 45-month revolving line of credit for which it
pays a commitment fee. Borrowings under this line of credit may be
made, at TPCs option, at a variable interest rate equal to either the
lenders base rate plus an applicable margin or at LIBOR plus an
applicable margin. The line of credit includes a utilization fee that
is added to the applicable margin for any date where advances exceed
50% of the total commitment. The commitment fee, applicable margin
and utilization fee are based upon a pre-established pricing grid that
is dependant upon TPCs long-term senior unsecured non-credit-enhanced
debt ratings.                                                                                                                                                                                                                                                                                                                                                                                                          
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | A $250.0 million 364-day revolving line of credit for which it
pays a commitment fee. TPC has the option, provided there is no
default or event of default, to convert outstanding advances at the
commitment termination date to a term loan maturing no later than one
year from the commitment termination date. With the consent of
Citibank, TPC may also extend the commitment of the facility for
another 364-day period under the same terms and conditions that are
currently in place. Borrowings under this line of credit may be made,
at TPCs option, at a variable interest rate equal to either the
lenders base rate plus an applicable margin or at LIBOR plus an
applicable margin. The line of credit includes a utilization fee that
is added to the applicable margin for any date where advances exceed
50% of the total commitment. The commitment fee, applicable margin
and utilization fee are based upon a pre-established pricing grid that
is dependant upon TPCs long-term senior unsecured non-credit-enhanced
debt ratings.



| |  | Previous lines of credit between TIGHI and Citigroup have been terminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On January 23, 2003, the Company, through its Capital Accumulation Program
(CAP), issued 1,943,627 shares of class A common stock in the form of
restricted stock to participating officers and other key employees. The fair
value per share of the class A common stock was $16.18. The restricted stock
generally vests 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. The unamortized unearned compensation expense associated
with these awards is included as unearned compensation as a separate
component of equity in the condensed consolidated balance sheet. Unearned
compensation expense is recognized as a charge to income ratably over the
vesting period.
|
| |  | 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 through September 2004 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 reported as treasury
stock in the consolidated balance sheet. There were no shares repurchased
under this program as of March 31, 2003.                                                                                                                                                                                                                                                                                                                                         
|
| |  | TPCs insurance subsidiaries are subject to various regulatory restrictions
that limit the maximum amount of dividends available to be paid to their
parent without prior approval of insurance regulatory authorities. A maximum
of $727.7 million will be available by the end of 2003 for such dividends
without prior approval of the Connecticut Insurance Department. However, a
portion of this amount is likely to be subject to approval by the Connecticut
Insurance Department, depending upon the amount and timing of the payments.
TPCs insurance subsidiaries did not pay any dividends to TIGHI during the
first quarter of 2003; however, on April 1, 2003, the insurance subsidiaries
paid $320.0 million of dividends to TIGHI.                                                                                                      

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|9.  |  | FEDERAL INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | At December 31, 2002, the Company had a net operating loss carryforward of
$1.390 billion, which expires December 31, 2022. Under terms of the tax
sharing agreement with Citigroup, the Company is entitled to carry operating
losses back to prior years upon receiving Citigroups consent. During the
first quarter of 2003, the Company received Citigroups consent and, as a
result, the Companys deferred tax asset was reduced by $486.5 million with a
corresponding reduction to the current federal income tax payable (included
in other cash flows from operating activities in the condensed consolidated
statement of cash flows.)                                                                                                                                                          
|   
|10. |  | CITIGROUP INDEMNIFICATION AGREEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | During March 2002, the Company entered into an agreement with Citigroup which
provided that in any year in which the Company recorded additional
asbestos-related income statement charges in excess of $150.0 million, net of
any reinsurance, Citigroup would pay to the Company the amount of any such
excess up to an cumulative aggregate of $800.0 million, reduced by the tax
effect of the highest applicable federal income tax rate. During 2002, the
Company recorded $2.945 billion of asbestos incurred losses, net of
reinsurance, and accordingly has fully utilized the total benefit available
under the agreement. At December 31, 2002, other assets included a $360.7
million receivable from Citigroup under this agreement, which amount was
received during the first quarter of 2003.
|   
|11. |  | 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 continues to be
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
could have a material adverse effect on the Companys financial condition or
liquidity.                                                                                         
|   
|    |  | The Company carries an allowance for uncollectible reinsurance recoverables
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 asbestos and
environmental-related claims 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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|11. |  | COMMITMENTS AND CONTINGENCIES, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Because each policyholder presents different liability and coverage
issues, the Company generally evaluates the asbestos-related exposure
presented by each policyholder on a policyholder-by-policyholder basis.
In the course of this evaluation, the Company considers: available
insurance coverage, including the role of any umbrella or excess insurance
the Company has issued to the policyholder; limits and deductibles; an
analysis of each policyholder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 related claim adjustment expense is determined
for each policyholder 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. Conventional actuarial methods are not utilized
to establish asbestos reserves. 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. There has
been an acceleration in recent quarters in the amount of payments,
including those from prior settlements of coverage disputes entered into
between the Company and certain of its policyholders. For the first
three months of 2003, approximately 66% of total paid losses relate to
policyholders with whom the Company previously entered into settlement
agreements that limit the Companys liability. Net asbestos losses paid
were $189.7 million and $76.3 million for the three months ended March
31, 2003 and 2002, respectively, reflective of the items previously
described.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | In establishing environmental reserves, the Company evaluates the
exposure presented by each policyholder and the anticipated cost of
resolution, if any, for each policyholder on a regular 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
policyholder 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
policyholder, including the role of any umbrella or excess insurance the
Company has issued to the policyholder; 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. Conventional actuarial
techniques are not used to estimate these reserves. Net environmental
losses paid were $2.0 million and $45.5 million for the three months
ended March 31, 2003 and 2002, respectively.                                                                                                                                                                       

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|11. |  | COMMITMENTS AND CONTINGENCIES, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | As a result of the processes and procedures described above, management
believes that the reserves carried for asbestos and environmental claims
at March 31, 2003 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 asbestos and and
environmental 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 policyholders in bankruptcy where negotiations often involve a
large number of claimants and other parties and require court approval to
be effective.
|   
|    |  | Because of the uncertainties set forth above, additional liabilities may
arise for amounts in excess of the current related reserves. 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 May 2002, the Company agreed with approximately three dozen other
insurers and PPG Industries, Inc. (PPG) on key terms to settle
asbestos-related coverage litigation under insurance policies issued to
PPG. While there remain a number of contingencies, including the final
execution of documents, court approval and possible appeals, the Company
believes that the completion of the settlement pursuant to the terms
announced in May 2002 is likely. The Companys single payment contribution
to the proposed settlement, expected in June 2004, is approximately $388.8
million after reinsurance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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|11. |  | COMMITMENTS AND CONTINGENCIES, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company is involved in a number of proceedings relating to ACandS,
Inc. (ACandS), formerly a national installer of products containing
asbestos. 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. An insurance coverage arbitration commenced in January 2001. The
presentation of this case before an arbitration panel commenced in April
2003. In January 2003, ACandS filed a proposed Plan of Reorganization in
its Bankruptcy proceeding. Pursuant to that plan, ACandS seeks to
establish a trust for the handling and disposition of asbestos claims.
That trust, according to the proposed plan, will be assigned ACandS
rights to its insurance policies issued by the Company. In addition to
the bankruptcy and the arbitration proceedings, 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.
|   
|    |  | 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 (Wisev. Travelers,and Meningerv. 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, West Virginia,
allege that the insurer defendants violated unfair trade practices
requirements and inappropriately handled and settled 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. Lawsuits similar to Wisehave been filed in Massachusetts
(2002) and Hawaii (2002, not served). 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, other than the
Hawaii actions, are currently subject to a temporary restraining order
entered by the federal bankruptcy court in New York, which had previously
presided over and approved the reorganization in bankruptcy of former
Travelers policyholder Johns Manville. In August 2002, the bankruptcy
court conducted a hearing on Travelers motion for a preliminary
injunction prohibiting further prosecution of the lawsuits pursuant to the
reorganization plan and related orders. At the conclusion of this
hearing, the court ordered the parties to mediation, appointed a mediator,
and continued the temporary restraining order. In January 2003, the same
bankruptcy court extended the existing injunction to apply to an
additional set of cases filed in various state courts in Texas as well as
to the attorneys who are prosecuting these cases. The order also enjoins
these attorneys and their respective law firms from commencing any further
lawsuits against the Company based upon these allegations without the
prior approval of the court.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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|11. |  | COMMITMENTS AND CONTINGENCIES, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company is vigorously defending all of the direct action 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.
|   
|    |  | The Company is involved in numerous 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 policyholders or as an insurer defending coverage claims
brought against it. While the ultimate resolution of these legal
proceedings could be significant to the Companys results of operations in
a future quarter, in the opinion of the Companys management it would not
be likely to have a material adverse effect on the Companys results of
operations for a calendar year or on the Companys financial condition or
liquidity.                                                                                                              

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|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|Item 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CONSOLIDATED OVERVIEW

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 and with Managements Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 31,
2002 included in the Companys Form 10-K.

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.

Consolidated Results of Operations

|                                                                  |  |      |         |      |  |   |         |  
|----------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|(for the three months ended March 31, in millions)                |  | 2003 |         | 2002
|                                                                  |  |      |         |     
|Revenues                                                          |  | $    | 3,603.0 |      |  | $ | 3,232.7 |  
|                                                                  |  |      |         |      |  |   |         |  
|Income before cumulative effect of change in accounting
principle |  | $    | 340.0   |      |  | $ | 344.7   |  
|Cumulative effect of change in accounting principle, net of tax   |  |      |        |      |  |   | (242.6  | )
|                                                                  |  |      |         |      |  |   |         |  
|Net income                                                        |  | $    | 340.0   |      |  | $ | 102.1   |  
|                                                                  |  |      |         |      |  |   |         |  

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.

Revenues of $3.603 billion in the 2003 first quarter increased $370.3 million
from the comparable period of 2002. The increase in the 2003 first quarter
revenue reflects a $394.0 million increase in earned premiums and a $33.6
million increase in fee income, offset by a $31.9 million decrease in net
investment income and a $22.3 million decrease in net realized investment
gains. Net realized investment gains include $58.2 million of impairment
charges in the 2003 first quarter, compared to $62.2 million in the comparable
period of 2002. The 2003 first quarter impairment charges were mostly related
to corporate bonds in the healthcare, communications and aviation sectors. The
2002 first quarter impairment charges were mostly related to corporate bonds in
the communications and energy sectors.

Net income was $340.0 million in the 2003 first quarter compared to $102.1
million in the comparable period of 2002. Net income for the 2003 first
quarter reflects strong underwriting performance due to the continuing
favorable rate environment, partially offset by higher weather-related
catastrophe losses and charges for prior year reserve development. Net income
included $1.5 million of net realized investment gains in the 2003 first
quarter compared to $18.9 million in the comparable period of 2002. Net income
for the first quarter of 2002 included a charge for the cumulative effect of a
change in accounting principle 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).

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Pursuant to the Securities and Exchange Commissions final rule, Conditions for
the Use of Non-GAAP Financial Measures (SEC rule), the Company has identified
operating income as a non-GAAP financial measure. Operating income is defined
by the Company as net income excluding net realized investment gains (losses),
restructuring charges and cumulative effect of changes in accounting
principles. Operating income is considered a more appropriate indicator of
underwriting and operating results. Net realized investment gains (losses) are
significantly impacted by both discretionary and other economic factors and are
not necessarily indicative of operating trends. The Company has reviewed its
use of financial measures and terms in the Companys Form 10-K for the year
ended December 31, 2002 and the Form 10-Q for the quarterly period ended March
31, 2003 (reports) and concluded that, other than operating income, the
measures and terms in these reports are either defined in GAAP, are operating
statistics, or are otherwise excluded by the SEC rule as required disclosures
of GAAP or of a governmental regulatory body. The major components of
operating income and a reconciliation of operating income to net income are as
follows:

|                                                                                       |           |      |       |        |   |   |        |       |  
|-------------------------------------------------------------------------------------- | --------- | ---- | ----- | ------ | - | - | ------ | ----- | -
|(for the three months ended March 31, in millions)                                     |           | 2003 |       | 2002  
|                                                                                       |           |      |       |       
|Consolidated underwriting gain, before catastrophes
and prior year reserve development |           | $    | 151.4 |        |   | $ | 45.6   |      
|Catastrophes                                                                           |           |      | (43.7 | )      |   |   | (10.4  | )    
|Prior year reserve development:                                                        |           |      |       |        |   |   |        |      
|                                                                                       | Asbestos  |      |       |       |   |   |        | (32.5 | )
|                                                                                       | All other |      |       | (106.2 | ) |   |        | (25.8 | )
|Accretion of discount                                                                  |           |      | (13.5 | )      |   |   | (7.2   | )    
|                                                                                       |           |      |       |        |   |   |        |      
|Underwriting loss                                                                      |           |      | (12.0 | )      |   |   | (30.3  | )    
|Net investment income                                                                  |           |      | 343.8 |        |   |   | 361.1  |      
|Other, including interest expense and minority
interest                                |           |      | 6.7   |        |   |   | (4.2   | )    
|                                                                                       |           |      |       |        |   |   |        |      
|Consolidated operating income                                                          |           |      | 338.5 |        |   |   | 326.6  |      
|Realized investment gains, net                                                         |           |      | 1.5   |        |   |   | 18.9   |      
|Restructuring charge                                                                   |           |      |      |        |   |   | (0.8   | )    
|Cumulative effect of change in accounting principle                                    |           |      |      |        |   |   | (242.6 | )    
|                                                                                       |           |      |       |        |   |   |        |      
|Consolidated net income                                                                |           | $    | 340.0 |        |   | $ | 102.1  |      
|                                                                                       |           |      |       |        |   |   |        |      

The 2003 first quarter operating income of $338.5 million increased $11.9
million compared to $326.6 million for the 2002 comparable period.
Underwriting gain, before catastrophes and prior year reserve development
increased $105.8 million to $151.4 million in the first quarter of 2003. The
first quarter 2003 underwriting results reflect the continuing favorable rate
environment in excess of loss cost trends, higher retention and selective
growth in new business. Impacting operating income was net unfavorable prior
year reserve development in the 2003 first quarter of
$106.2 million after tax versus
$58.3 million after tax of unfavorable prior year reserve development in the prior year
quarter ($163.4 million and $89.6 million pretax,
respectively). The most significant component of the 2003 first quarter prior year
reserve development was a $174.9 million after tax charge
($269.1 million pretax) related to reserve
strengthening at Gulf Insurance (a majority-owned subsidiary). The reserve
strengthening primarily related to a line of business that insured the residual
values of leased vehicles and that was placed in runoff in late 2001. The
charge reflects the significant decline in used vehicle prices experienced
during the first quarter of 2003 and an assumption of further reductions during
the remainder of the year. This trend is consistent with recent reductions in
the Manheim Used Vehicle Value Index. Also included in the charge were costs
related to the resolution of a residual value claims dispute in the amount of
$82.6 million. The effect of these charges to TPC was $145.5 million after tax
and minority interest. The Gulf reserve strengthening was partially offset by
a $68.7 million ($105.7 million pretax) benefit related to net favorable prior year reserve development
in Commercial Lines and Personal Lines, related primarily to property business
written in 2002. The 2003 first quarter prior year reserve development
contained no asbestos charges compared to $32.5 million
($50.0 million pretax) of unfavorable prior
year reserve development related to asbestos in the 2002 first quarter. The
2003 first quarter was also unfavorably impacted by higher catastrophe losses.
Despite strong cash flows from operations, after tax net investment income of $343.8
million was $17.3 million lower than the prior year period due to the lower
interest rate environment and a reduction in average duration, along with
reduced returns in the Companys private equity and real estate equity
investments.

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Earned premiums increased $394.0 million to $2.979 billion in the 2003 first
quarter, from $2.585 billion in the comparable period of 2002. The increase in
earned premiums in the 2003 first quarter was due to rate increases on renewal
business in both Commercial Lines and Personal Lines. Commercial Lines earned
premiums increased $285.7 million or 18% and Personal Lines earned premiums
increased $108.3 million or 11%.

Net investment income was $455.9 million in the 2003 first quarter, a decrease
of $31.9 million from the comparable period of 2002. The decline resulted from
a reduction in pretax investment yields to 5.3% in the 2003 first quarter from
6.2% in the 2002 comparable period. The decrease in yields reflected the lower
interest rate environment, a higher proportion of tax exempt investments and a
reduction in average duration, along with lower returns in the Companys
private equity and real estate equity investments. The lower average yield was
partly offset by the benefit of higher average invested assets that resulted
from strong cash flows from underwriting.

Fee income was $136.3 million in the 2003 first quarter, a $33.6 million
increase from the comparable period of 2002. 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. Fees rose as both new business and
pricing levels increased and more workers compensation business was written by
state residual market pools. Expected annual claim volume under administration
for business written in the first quarter increased to $1.097 billion for the
2003 first quarter compared to $871.3 million for the comparable period in
2002. Claim volume under administration represents a measure of claim volume
expected to be serviced, under contracts written in the period, on fee for
service arrangements or loss sensitive insurance products.

Claims and expenses of $3.196 billion in the 2003 first quarter increased
$417.3 million from $2.778 billion in the comparable period of 2002. The 2003
increase was primarily due to increased loss cost trends, higher charges for
prior year reserve development, higher weather related catastrophe losses,
increased contingent commission expense as a result of profitable growth,
higher interest expense and shareholder services costs. Unfavorable prior year
reserve development amounted to $163.4 million for the first quarter of 2003
compared to 2002 unfavorable prior year reserve development of $89.6 million.
The most significant component of prior year reserve development in the 2003
first quarter was Gulf Insurance reserve strengthening that amounted to $269.1
million. This charge was partially offset by net favorable prior year reserve
development of $105.7 million in both Commercial Lines and Personal Lines
primarily related to property coverages. The 2003 first quarter prior year
reserve development contained no charges related to asbestos compared to $50.0
million of unfavorable prior year reserve development related to asbestos in
the 2002 first quarter. Higher interest expense resulted from recent financing
activities while shareholder services costs increased subsequent to the August
20, 2002 spin off from Citigroup. For additional information on the Companys
spin off from Citigroup, see the Companys Form 10-K for the year ended
December 31, 2002.

The Companys effective federal tax rate was 22.0% in the 2003 first quarter
compared to 24.1% in the comparable period of 2002. The decrease in the
effective federal tax rate reflects the combination of a higher level of
non-taxable investment income and lower pretax income for the first quarter of
2003 compared to the first quarter of 2002.

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Consolidated net written premiums were as follows:

|                                                   |  |      |         |      |  |   |         | 
|-------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|(for the three months ended March 31, in millions) |  | 2003 |         | 2002
|                                                   |  |      |         |     
|Commercial Lines                                   |  | $    | 2,016.5 |      |  | $ | 1,687.7 | 
|Personal Lines                                     |  |      | 1,150.0 |      |  |   | 1,037.4 | 
|                                                   |  |      |         |      |  |   |         | 
|Total net written premiums                         |  | $    | 3,166.5 |      |  | $ | 2,725.1 | 
|                                                   |  |      |         |      |  |   |         | 

Net written premiums increased $441.4 million to $3.167 billion for the 2003
first quarter from $2.725 billion in the 2002 first quarter. The increase in
net written premiums in 2003 was primarily due to higher rates and strong
retention across all major lines of business.

The GAAP combined ratios before policyholder dividends were as follows:

|                                                                                          |           |      |       |      |  |  |       |      |  | 
|----------------------------------------------------------------------------------------- | --------- | ---- | ----- | ---- |  |  | ----- | ---- |  | 
|(for the three months ended March 31,)                                                    |           | 2003 |       | 2002
|                                                                                          |           |      |       |     
|Consolidated GAAP combined ratio, before catastrophes
and prior year reserve development: |           |      |       |      |  |  |       |     
|Loss and loss adjustment expense (LAE) ratio                                              |           |      | 66.2  | %    |  |  | 70.1  | %   
|Underwriting expense ratio                                                                |           |      | 26.0  |      |  |  | 27.3  |     
|                                                                                          |           |      |       |      |  |  |       |     
|                                                                                          | Total     |      |       | 92.2 |  |  |       | 97.4 | 
|Catastrophes                                                                              |           |      | 2.3   |      |  |  | 0.6   |     
|Prior year reserve development:                                                           |           |      |       |      |  |  |       |     
|                                                                                          | Asbestos  |      |       |     |  |  |       | 2.0  | 
|                                                                                          | All other |      |       | 5.5  |  |  |       | 1.5  | 
|Accretion of discount                                                                     |           |      | 0.7   |      |  |  | 0.4   |     
|                                                                                          |           |      |       |      |  |  |       |     
|Consolidated GAAP combined ratio                                                          |           |      | 100.7 | %    |  |  | 101.9 | %   
|                                                                                          |           |      |       |      |  |  |       |     

The GAAP combined ratio before policyholder dividends improved by 1.2 points in
the 2003 first quarter as compared to the first quarter of 2002. The 5.2 point
improvement in the 2003 first quarter GAAP combined ratio, before catastrophes
and prior year reserve development reflects an improvement in both the loss and
LAE ratio and the underwriting expense ratio. The improvement in the loss and
LAE ratio is primarily attributed to the continued disciplined underwriting
that achieved rate increases in excess of loss cost trends in both Commercial
Lines and Personal Lines. The improvement in the underwriting expense ratio is
primarily attributed to premium rate increases and a higher volume of business.
The GAAP combined ratio reflects the negative impact of the higher
catastrophes and prior year reserve development.

RESULTS OF OPERATIONS BY SEGMENT

Commercial Lines

|                                                                  |  |      |         |      |  |   |         |  
|----------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|(for the three months ended March 31, in millions)                |  | 2003 |         | 2002
|                                                                  |  |      |         |     
|Revenues                                                          |  | $    | 2,360.1 |      |  | $ | 2,087.9 |  
|                                                                  |  |      |         |      |  |   |         |  
|Income before cumulative effect of change in accounting
principle |  | $    | 267.6   |      |  | $ | 304.1   |  
|Cumulative effect of change in accounting principle, net of tax   |  |      |        |      |  |   | (242.6  | )
|                                                                  |  |      |         |      |  |   |         |  
|Net income                                                        |  | $    | 267.6   |      |  | $ | 61.5    |  
|                                                                  |  |      |         |      |  |   |         |  

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Revenues of $2.360 billion in the 2003 first quarter increased $272.2 million
from $2.088 billion in the comparable period of 2002. This increase was
primarily attributable to an increase in earned premiums due to premium rate
increases. The increase in revenue for the 2003 first quarter was partially
offset by lower net investment income combined with lower net realized
investment gains in the 2003 first quarter compared to the 2002 first quarter.

Net income was $267.6 million in the 2003 first quarter compared to $61.5
million in the comparable period of 2002. Commercial Lines net income included
$6.7 million of net realized investment gains in the 2003 first quarter
compared to $26.5 million of net realized investment gains in the comparable
period of 2002. Net income for the 2002 first quarter 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.

The major components of operating income and a reconciliation of operating
income to net income are as follows:

|                                                                                           |           |      |       |        |   |   |        |       |  
|------------------------------------------------------------------------------------------ | --------- | ---- | ----- | ------ | - | - | ------ | ----- | -
|(for the three months ended March 31, in millions)                                         |           | 2003 |       | 2002  
|                                                                                           |           |      |       |       
|Commercial Lines underwriting gain, before catastrophes
and prior year reserve development |           | $    | 116.3 |        |   | $ | 49.3   |      
|Catastrophes                                                                               |           |      | (19.5 | )      |   |   |       |      
|Prior year reserve development:                                                            |           |      |       |        |   |   |        |      
|                                                                                           | Asbestos  |      |       |       |   |   |        | (32.5 | )
|                                                                                           | All other |      |       | (128.9 | ) |   |        | (22.5 | )
|Accretion of discount                                                                      |           |      | (13.5 | )      |   |   | (7.2   | )    
|                                                                                           |           |      |       |        |   |   |        |      
|Underwriting loss                                                                          |           |      | (45.6 | )      |   |   | (12.9  | )    
|Net investment income                                                                      |           |      | 278.5 |        |   |   | 285.4  |      
|Other, including minority interest                                                         |           |      | 28.0  |        |   |   | 5.1    |      
|                                                                                           |           |      |       |        |   |   |        |      
|Commercial Lines operating income                                                          |           |      | 260.9 |        |   |   | 277.6  |      
|Realized investment gains, net                                                             |           |      | 6.7   |        |   |   | 26.5   |      
|Cumulative effect of change in accounting principle                                        |           |      |      |        |   |   | (242.6 | )    
|                                                                                           |           |      |       |        |   |   |        |      
|Commercial Lines net income                                                                |           | $    | 267.6 |        |   | $ | 61.5   |      
|                                                                                           |           |      |       |        |   |   |        |      

Operating income of $260.9 million in the 2003 first quarter decreased $16.7
million compared to $277.6 million in the 2002 comparable quarter.
Underwriting gain, before catastrophes and prior year reserve development
increased $67.0 million to $116.3 million in the first quarter of 2003. The
first quarter 2003 underwriting results reflect the continuing favorable rate
environment in excess of loss cost trends, higher retention and selective
growth in new business. Impacting operating income was net unfavorable prior
year reserve development in the 2003 first quarter of
$128.9 million after tax versus
$55.0 million after tax of unfavorable prior year reserve development in the prior year
quarter ($198.4 million and $84.6 million pretax,
respectively). The most significant component of the 2003 first quarter prior year
reserve development was a $174.9 million after tax charge
($269.1 million pretax) related to reserve
strengthening at Gulf Insurance. The reserve strengthening primarily related
to a line of business that insured the residual values of leased vehicles and
that was placed in runoff in late 2001. The charge reflects the significant
decline in used vehicle prices experienced during the first quarter of 2003 and
an assumption of further reductions during the remainder of the year. This
trend is consistent with recent reductions in the Manheim Used Vehicle Value
Index. Also included in the charge were costs related to the resolution of a
residual value claims dispute in the amount of $82.6 million. The total effect
of this reserve strengthening charge to TPC was $145.5 million after tax and
minority interest. The Gulf reserve strengthening was partially offset by a
$46.0 million ($70.7 million pretax) benefit related to net favorable prior year reserve development
primarily related to property business written in 2002. The 2003 first quarter
reflects no charge related to asbestos versus a charge of
$32.5 million ($50.0 million pretax) in the
prior period quarter. The 2003 first quarter was also unfavorably impacted by
$19.5 million of catastrophe losses compared to no catastrophe losses in the
comparable period of 2002. Despite strong cash flows from operations,
after tax net
investment income of $278.5 million was $6.9 million lower than the prior year
quarter due to the lower interest rate environment and a reduction in average
duration, along with reduced returns in the Companys private equity and real
estate equity investments. Significantly offsetting the above was the benefit
of the favorable rate environment and higher production levels.

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Earned premiums increased $285.7 million to $1.840 billion in the 2003 first
quarter from $1.555 billion in the comparable period of 2002. The increase in
earned premiums in the 2003 first quarter was primarily due to premium rate
increases.

Net investment income was $365.7 million in the 2003 first quarter, a decrease
of $16.7 million from the comparable period of 2002. The decline resulted from
a pretax reduction in investment yields in the 2003 first quarter from the 2002
comparable period. The decrease in yields reflected the lower interest rate
environment, a higher proportion of tax exempt investments and a reduction in
average duration, along with lower returns in the Companys private equity and
real estate equity investments. The lower average yield was partly offset by
the benefit of higher average invested assets that resulted from strong cash
flow from underwriting.

Fee income was $136.3 million in the 2003 first quarter, a $33.6 million
increase from the comparable period of 2002. 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. Fees rose as both new business and pricing levels increased and more
workers compensation business was written by state residual market pools.
Claim volume under administration increased to $1.097 billion for the 2003
first quarter compared to $871.3 million for the comparable period in 2002.

Commercial Lines net written premiums by market were as follows:

|                                                   |                     |                 |         |       |         |   |         |       |         | 
|-------------------------------------------------- | ------------------- | --------------- | ------- | ----- | ------- | - | ------- | ----- | ------- | 
|(for the three months ended March 31, in millions) |                     | 2003            |         | 2002 
|                                                   |                     |                 |         |      
|Core                                               |                     |                 |         |       |         |   |         |      
|                                                   | National Accounts   |                 | $       | 226.9 |         |   | $       | 96.8  |        
|                                                   | Commercial Accounts |                 |         | 949.4 |         |   |         | 859.3 |        
|                                                   | Select Accounts     |                 |         | 509.3 |         |   |         | 455.0 |        
|                                                   |                     |                 |         |       |         |   |         |       |        
|                                                   |                     | Total Core      |         |       | 1,685.6 |   |         |       | 1,411.1 | 
|Specialty                                          |                     |                 |         |       |         |   |         |      
|                                                   | Bond                |                 |         | 163.0 |         |   |         | 131.6 |        
|                                                   | Gulf                |                 |         | 167.9 |         |   |         | 145.0 |        
|                                                   |                     |                 |         |       |         |   |         |       |        
|                                                   |                     | Total Specialty |         |       | 330.9   |   |         |       | 276.6   | 
|                                                   |                     |                 |         |       |         |   |         |       |        
|Total net written premiums                         |                     | $               | 2,016.5 |       |         | $ | 1,687.7 |      
|                                                   |                     |                 |         |       |         |   |         |       |        

Net written premiums increased $328.8 million to $2.017 billion for the 2003
first quarter. The strong rate environment, growth in targeted new business,
and higher customer retention levels all combined to drive premium growth.

In addition to fee based products, National Accounts works with national and
regional brokers to provide 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 $226.9 million in the 2003
first quarter compared to $96.8 million in the comparable period of 2002. The
increase in net written premiums was due to renewal price increases, higher new
business levels and higher business volume in residual market pools. The first
quarter of 2002 also included a single, large premium reduction of $41.0
million related to loss-sensitive business. For fee based products see
discussion of fee income above.

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Commercial Accounts serves primarily mid-sized businesses for casualty products
and large, mid-sized and small businesses for property products through a
network of independent agents and brokers. Commercial Accounts net written
premiums increased 10% to $949.4 million in the 2003 first quarter, primarily
driven by renewal price change increases averaging 17% for the 2003 first
quarter, down from 24% in the first quarter of 2002 but consistent with the
fourth quarter of 2002, and strong growth in new business offset by a decrease
due to run-off lines of business. Excluding Northland and Associates, net
written premiums were up 21%. All major product lines  commercial automobile,
property and general liability  contributed to the rise in renewal pricing.
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 premiums in
Commercial Accounts for the 2003 first quarter were $201.3 million compared to
$187.3 million in the comparable period of 2002. The business retention ratio
for the 2003 first quarter was 80%, up from 75% for the comparable period of
2002. 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 the
Companys Northland and Associates subsidiaries. Net written premiums
associated with Northland and Associates subsidiaries were $134.3 million
compared to $183.5 million in the prior year quarter due to the 2002 decision
to discontinue certain low margin specialty lines.

Select Accounts serves small businesses through a network of independent
agents. Select Accounts net written premiums increased 12% to $509.3 million
in the 2003 first quarter. The increase in Select Accounts net written
premiums primarily reflected renewal price changes averaging 13% for the 2003
first quarter compared to 17% in both the first and fourth quarters of 2002.
New business premiums in Select Accounts for the 2003 first quarter were $94.7
million compared to $66.8 million in the comparable period of 2002. New
business growth was especially strong in property, general liability and
commercial multi-peril. The business retention ratio for the 2003 first
quarter increased to 84% compared to 79% for the comparable period of 2002.
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 multi-peril 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 $163.0 million in the 2003 first quarter were $31.4
million higher than the comparable period of 2002, which included a $17.5
million reduction due to a change in the Bond Executive Liability excess of
loss reinsurance treaty that was effective January 1, 2002. The increase of
$13.9 million, before the reinsurance adjustment, reflects a favorable premium
rate environment and strong production growth principally in executive
liability product lines, which target middle and small market private accounts,
partially offset by higher reinsurance costs. In addition, the surety product
lines benefited from higher premium rates in the 2003 first quarter.

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 with particular emphasis on management and
professional liability coverages and excess and surplus lines of insurance.
Gulf net written premiums of $167.9 million in the 2003 first quarter increased
$22.9 million compared to $145.0 million in the comparable period of 2002 due
to significant rate increases, especially for directors and officers
liability insurance and other professional liability products. Gulfs decision
to exit non-core businesses, including assumed reinsurance, transportation,
residual value and property, partially offset increases in Gulfs core
specialty lines.

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Commercial Lines claims and expenses of $2.054 billion in the 2003 first
quarter increased $368.3 million from $1.685 billion in the comparable period
of 2002. The 2003 increase was primarily due to increased loss cost trends,
unfavorable prior year reserve development and higher weather related
catastrophe losses. Unfavorable prior year reserve development included in
claims and expenses in 2003 was $198.4 million for the 2003 first quarter
compared to 2002 first quarter unfavorable prior year reserve development of
$84.6 million. The most significant component in the 2003 first quarter prior
year reserve development was $269.1 million related to Gulf Insurance reserve
strengthening for a line of business that insured residual values of leased
vehicles and that was placed in runoff in late 2001. This increase was
partially offset by a $70.7 million benefit of other net favorable prior year
reserve development primarily related to property coverages. Catastrophe
losses, net of tax and reinsurance, were $19.5 million in the 2003 first
quarter compared to no catastrophe losses in the 2002 first quarter.
Catastrophe losses in the 2003 first quarter resulted from a severe winter
storm in Colorado.

GAAP combined ratios before policyholder dividends for Commercial Lines were as
follows:

|                                                                                              |           |      |       |      |  |  |       |      |  | 
|--------------------------------------------------------------------------------------------- | --------- | ---- | ----- | ---- |  |  | ----- | ---- |  | 
|(for the three months ended March 31,)                                                        |           | 2003 |       | 2002
|                                                                                              |           |      |       |     
|Commerical Lines GAAP combined ratio, before catastrophes
and prior year reserve development: |           |      |       |      |  |  |       |     
|Loss and LAE ratio                                                                            |           |      | 63.9  | %    |  |  | 67.2  | %   
|Underwriting expense ratio                                                                    |           |      | 26.5  |      |  |  | 27.9  |     
|                                                                                              |           |      |       |      |  |  |       |     
|                                                                                              | Total     |      |       | 90.4 |  |  |       | 95.1 | 
|Catastrophes                                                                                  |           |      | 1.6   |      |  |  |      |     
|Prior year reserve development:                                                               |           |      |       |      |  |  |       |     
|                                                                                              | Asbestos  |      |       |     |  |  |       | 3.2  | 
|                                                                                              | All other |      |       | 10.8 |  |  |       | 2.3  | 
|Accretion of discount                                                                         |           |      | 1.1   |      |  |  | 0.7   |     
|                                                                                              |           |      |       |      |  |  |       |     
|Commercial Lines GAAP combined ratio                                                          |           |      | 103.9 | %    |  |  | 101.3 | %   
|                                                                                              |           |      |       |      |  |  |       |     

The 2.6 point deterioration in the GAAP combined ratio before policyholder
dividends was due to higher prior year reserve development and catastrophe
losses in the 2003 first quarter compared to the 2002 first quarter. The
improvement in the 2003 first quarter GAAP combined ratio, before catastrophes
and prior year reserve development, from the 2002 first quarter, reflects
improvement in both the loss and LAE ratio and the underwriting expense ratio.
The improvement in the loss and LAE ratio is primarily due to the benefit of
the favorable rate environment in excess of loss trends and improved
profitability from the Companys continued effort to adjust business mix to
areas generating rate adequacy. The improvement in the underwriting expense
ratio is primarily attributed to premium rate increases.

Personal Lines

|                                                   |  |      |         |      |  |   |         | 
|-------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|(for the three months ended March 31, in millions) |  | 2003 |         | 2002
|                                                   |  |      |         |     
|Revenues                                           |  | $    | 1,241.3 |      |  | $ | 1,143.4 | 
|Net income                                         |  | $    | 107.3   |      |  | $ | 62.6    | 
|                                                   |  |      |         |      |  |   |         | 

Revenues during the 2003 first quarter of $1.241 billion increased $97.9
million from the comparable period of 2002. The increase in revenues resulted
from growth in earned premiums due to premium rate increases as reflected in
renewal price increases, a decrease in net investment income and lower net
realized investment losses in the 2003 first quarter. Renewal price change for
Personal Lines products 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.

Net income was $107.3 million in the 2003 first quarter compared to $62.6
million in the comparable period of 2002. Personal Lines net income included
$5.2 million of net realized investment losses in the 2003 first quarter
compared to $7.8 million of net realized investment losses in the 2002 first
quarter.

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The major components of operating income and a reconciliation of operating
income to net income are as follows:

|                                                                                                |  |      |       |      |  |   |       |  
|----------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ----- | -
|(for the three months ended March 31, in millions)                                              |  | 2003 |       | 2002
|                                                                                                |  |      |       |     
|Personal Lines underwriting gain (loss), before catastrophes
and prior year reserve development |  | $    | 35.1  |      |  | $ | (3.7  | )
|Catastrophes                                                                                    |  |      | (24.2 | )    |  |   | (10.4 | )
|Prior year reserve development                                                                  |  |      | 22.7  |      |  |   | (3.3  | )
|                                                                                                |  |      |       |      |  |   |       |  
|Underwriting gain (loss)                                                                        |  |      | 33.6  |      |  |   | (17.4 | )
|Net investment income                                                                           |  |      | 64.8  |      |  |   | 75.0  |  
|Other                                                                                           |  |      | 14.1  |      |  |   | 13.6  |  
|                                                                                                |  |      |       |      |  |   |       |  
|Personal Lines operating income                                                                 |  |      | 112.5 |      |  |   | 71.2  |  
|Realized investment losses, net                                                                 |  |      | (5.2  | )    |  |   | (7.8  | )
|Restructuring charge                                                                            |  |      |      |      |  |   | (0.8  | )
|                                                                                                |  |      |       |      |  |   |       |  
|Personal Lines net income                                                                       |  | $    | 107.3 |      |  | $ | 62.6  |  
|                                                                                                |  |      |       |      |  |   |       |  

Operating income of $112.5 million for the 2003 first quarter was $41.3 million
higher than $71.2 million for the 2002 comparable period. Underwriting gain
(loss), before catastrophes and prior year reserve development increased $38.8
million to $35.1 million in the first quarter of 2003 due to an improved rate
environment in both auto and property and a moderation in the increase in loss
cost trends. Operating income in the 2003 first quarter was unfavorably
impacted by catastrophe losses of $24.2 million compared to $10.4 million in
the prior year quarter. Also impacting operating income was favorable prior
year reserve development in the 2003 first quarter of
$22.7 million after tax versus $3.3 million after tax of
unfavorable prior year reserve development in the prior year quarter
($35.0 million and $5.0 million pretax, respectively). In
addition, after tax net investment income of $64.8 million was $10.2 million lower
than the 2002 first quarter.

Earned premiums increased $108.3 million to $1.138 billion in the 2003 first
quarter from $1.030 billion in the comparable period of 2002. The increase in
earned premiums in the 2003 first quarter was primarily due to renewal price
increases in all product lines.

Net investment income was $89.4 million in the 2003 first quarter, a decrease
of $14.9 million from the comparable period of 2002. The decline resulted from
a reduction in investment yields in the 2003 first quarter from the 2002
comparable period. The decrease in yields resulted from the lower interest
rate environment, a higher proportion of tax exempt investments and a reduction
in average duration, along with reduced returns in the Companys private equity
and real estate equity investments. The lower average yield was partly offset
by the benefit of higher average invested assets resulting from strong cash
flows from operations.

Personal Lines net written premiums by product line were as follows:

|                                                   |  |      |         |      |  |   |         | 
|-------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|(for the three months ended March 31, in millions) |  | 2003 |         | 2002
|                                                   |  |      |         |     
|Automobile                                         |  | $    | 736.6   |      |  | $ | 687.1   | 
|Homeowners and Other                               |  |      | 413.4   |      |  |   | 350.3   | 
|                                                   |  |      |         |      |  |   |         | 
|Total net written premiums                         |  | $    | 1,150.0 |      |  | $ | 1,037.4 | 
|                                                   |  |      |         |      |  |   |         | 

The increase in net written premiums of $112.6 million in the 2003 first
quarter was principally a result of renewal price increases in both the
Automobile and Homeowners and Other lines of business.

Automobile net written premiums increased 7% to $736.6 million in the 2003
first quarter. Renewal price changes for standard voluntary business were 7%
for the 2003 first quarter consistent with the first quarter 2002 and one
percentage point below fourth quarter 2002. Policy retention levels for
standard voluntary business remained favorable and averaged 81%, up one
percentage point from the prior year quarter. Retention for Personal Lines
products represents the estimated percentage of policies from the prior period
renewed in the current period.

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Homeowners and Other net written premiums increased 18% to $413.4 million in
the 2003 first quarter. Renewal price changes averaged 13% for the 2003 first
quarter compared to 12% in the first quarter 2002 and 15% in the fourth quarter
2002. Retention levels also remained favorable and averaged 81%.

Production through the Companys independent agents in Personal Lines, which
represents over 82% of Personal Lines total net written premiums, was up 11% to
$945.0 million in the 2003 first quarter. Net written premiums through other
channels were up 10% to $205.0 million for the 2003 first quarter 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 $1.087 billion in the 2003 first quarter
increased $28.7 million from $1.058 billion in the first quarter of 2002. The
2003 increase was primarily attributed to the effect of increased loss cost
trends and higher catastrophe losses partially offset by favorable prior year
reserve development. The 2003 first quarter includes $35.0 million of
favorable prior year reserve development versus unfavorable prior year reserve
development of $5.0 million in the 2002 first quarter. The 2003 first quarter
favorable prior year reserve development primarily related to property business
written in 2002. Catastrophe losses, net of tax and reinsurance, were $24.2
million in the 2003 first quarter compared to $10.4 million in the comparable
period of 2002. Catastrophe losses in the 2003 first quarter were primarily
due to winter storms in the Mid-Atlantic states, the Northeast and Colorado.
Catastrophe losses in the 2002 first quarter were primarily due to winter
storms in the Midwest and New York.

GAAP combined ratios for Personal Lines were as follows:

|                                                                                            |       |      |      |      |  |  |       |       | 
|------------------------------------------------------------------------------------------- | ----- | ---- | ---- | ---- |  |  | ----- | ----- | 
|(for the three months ended March 31,)                                                      |       | 2003 |      | 2002
|                                                                                            |       |      |      |     
|Personal Lines GAAP combined ratio, before catastrophes
and prior year reserve development: |       |      |      |      |  |  |       |      
|Loss and LAE ratio                                                                          |       |      | 70.1 | %    |  |  | 74.2  | %    
|Underwriting expense ratio                                                                  |       |      | 25.1 |      |  |  | 26.4  |      
|                                                                                            |       |      |      |      |  |  |       |      
|                                                                                            | Total |      |      | 95.2 |  |  |       | 100.6 | 
|Catastrophes                                                                                |       |      | 3.3  |      |  |  | 1.6   |      
|Prior year reserve development                                                              |       |      | (3.1 | )    |  |  | 0.5   |      
|                                                                                            |       |      |      |      |  |  |       |      
|Personal Lines GAAP combined ratio                                                          |       |      | 95.4 | %    |  |  | 102.7 | %    
|                                                                                            |       |      |      |      |  |  |       |      

The 7.3 point improvement in the 2003 first quarter GAAP combined ratio
resulted from premium rate increases that exceeded loss cost trends and
favorable prior year reserve development compared to unfavorable prior year
reserve development in the 2002 first quarter, partially offset by higher
catastrophes. The improvement in the 2003 first quarter GAAP combined ratio
before catastrophes and prior year reserve development compared to the 2002
first quarter, reflects an improvement in both the loss and LAE ratio and in
the underwriting expense ratio. The improvement in the underwriting expense
ratio is primarily attributed to the benefit of premium rate increases.

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Interest Expense and Other

|                                                   |  |      |   |       |   |  |   |       |  
|-------------------------------------------------- |  | ---- | - | ----- | - |  | - | ----- | -
|(for the three months ended March 31, in millions) |  | 2003 |   | 2002 
|                                                   |  |      |   |      
|Revenues                                           |  |      | $ | 1.6   |   |  | $ | 1.4   |  
|Net loss                                           |  |      | $ | (34.9 | ) |  | $ | (22.0 | )
|                                                   |  |      |   |       |   |  |   |       |  

The after tax charge of $34.9 million for Interest Expense and Other increased
from $22.0 million in the prior year quarter, primarily due to higher interest
costs and shareholder services costs that increased subsequent to the August
20, 2002, spin off from Citigroup. The primary component of net loss was
after-tax interest expense of $32.8 million in the 2003 first quarter and $22.9
million in the 2002 comparable period. The increase in interest expense in the
2003 first quarter is primarily due to recent refinancing activities, which
included temporary financing of $550.0 million first obtained in December 2002
in connection with the fourth quarter 2002 asbestos reserve strengthening and
$1.400 billion of senior notes issued on March 11, 2003. The proceeds from
this note issuance were used to prepay, in full, a $500.0 million note to
Citigroup on March 11, 2003, and to redeem $900.0 million of trust preferred
securities on April 9, 2003. For additional information see Liquidity and
Capital Resources.

ASBESTOS CLAIMS AND LITIGATION

The Company believes that the property and casualty insurance industry has
suffered from judicial interpretations and other trends 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. As a result, the Company
continues to experience an increase in the number of asbestos claims being
tendered to the Company by the Companys policyholders (which includes others
seeking coverage under a policy) including claims against the Companys
policyholders by individuals who do not appear to be impaired by asbestos
exposure. Factors underlying 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, bankruptcy proceedings may increase the volatility of asbestos-related
losses by initially delaying the reporting of claims and later 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 for bankruptcy, including, among others, ACandS,
Inc., and who have 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. During 2002 and continuing
into 2003, the trends described above have accelerated. Accordingly, there is
a high degree of uncertainty with respect to future exposure from asbestos
claims. See Uncertainty Regarding Adequacy of Asbestos and Environmental
Reserves.

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. 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 policyholders favor and
other additional Company 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.

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Many coverage disputes with policyholders are only resolved through settlement
agreements. Because many policyholders make exaggerated demands, it is
difficult to predict the outcome of settlement negotiations. Settlements
involving bankrupt policyholders may include extensive releases which are
favorable to the Company but could result in settlements for larger
amounts than originally anticipated. As in the past, the Company will continue
to pursue settlement opportunities. For a discussion of settlement activities
with PPG Industries, Inc. see note 11 to the condensed consolidated financial
statements.

In addition, proceedings have 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 policyholder presents different liability and coverage issues, the
Company generally evaluates the exposure presented by each policyholder on a
policyholder-by-policyholder basis. In the course of this evaluation, the
Company considers: available insurance coverage, including the role of any
umbrella or excess insurance the Company has issued to the policyholder; limits
and deductibles; an analysis of each policyholder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 related claim adjustment expense is determined for each
policyholder 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. Conventional
actuarial methods are not utilized to establish asbestos reserves. 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. There has been an
acceleration in recent quarters in the amount of payments, including those from
prior settlements of coverage disputes entered into between the Company and
certain of its policyholders. For the first quarter of 2003, approximately 66%
of total paid losses relate to policyholders with whom the Company previously
entered into settlement agreements that limit the Companys liability. Net
asbestos losses paid were $189.7 million for the first quarter of 2003 compared
to $76.3 million for the first quarter of 2002 reflective of the items
described above and consistent with Company expectations based upon the
Companys recently completed asbestos study.

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

|                                                          |        |      |   |         |         |   |   |        |         |  
|--------------------------------------------------------- | ------ | ---- | - | ------- | ------- | - | - | ------ | ------- | -
|(at and for the three months ended March 31, in millions) |        | 2003 |   | 2002   
|                                                          |        |      |   |        
|Beginning reserves:                                       |        |      |   |         |         |   |   |       
|                                                          | Direct |      |   | $       | 4,287.1 |   |   | $      | 1,046.0 |  
|                                                          | Ceded  |      |   | (882.8  | )       |   |   | (225.6 | )      
|                                                          |        |      |   |         |         |   |   |        |         |  
|                                                          | Net    |      |   | 3,404.3 |         |   |   | 820.4  |        
|Incurred losses and loss expenses:                        |        |      |   |         |         |   |   |       
|                                                          | Direct |      |   |         |        |   |   |        | 49.8    |  
|                                                          | Ceded  |      |   |        |         |   |   | 0.2    |        
|Accretion of discount:                                    |        |      |   |         |         |   |   |       
|                                                          | Direct |      |   | 7.6     |         |   |   |       |        
|                                                          | Ceded  |      |   | (0.1    | )       |   |   |       |        
|Losses paid:                                              |        |      |   |         |         |   |   |       
|                                                          | Direct |      |   | 211.6   |         |   |   | 91.8   |        
|                                                          | Ceded  |      |   | (21.9   | )       |   |   | (15.5  | )      
|                                                          |        |      |   |         |         |   |   |        |         |  
|Ending reserves:                                          |        |      |   |         |         |   |   |       
|                                                          | Direct |      |   |         | 4,083.1 |   |   |        | 1,004.0 |  
|                                                          | Ceded  |      |   |         | (861.0  | ) |   |        | (209.9  | )
|                                                          |        |      |   |         |         |   |   |        |         |  
|                                                          | Net    |      | $ | 3,222.1 |         |   | $ | 794.1  |        
|                                                          |        |      |   |         |         |   |   |        |         |  

There are currently state and federal
proposals to reform the current system for handling asbestos claims
and related litigation.
One prominent proposal is the creation of a federal asbestos claims trust to
compensate asbestos claimants. At this time it
is not possible to predict the likelihood or timing of such proposals being
enacted or the effect on the Company if they are enacted.

ENVIRONMENTAL CLAIMS AND LITIGATION

The Company continues to receive claims from policyholders which allege that
they are liable for injury or damage arising out of their alleged disposition
of toxic substances. Mostly, these claims are due to various legislative as
well as regulatory efforts aimed at environmental remediation. For instance,
the Comprehensive Environmental Response, Compensation and Liability Act, or
CERCLA, enacted in 1980 and later modified, enables private parties as well as
federal and state governments to take action with respect to releases and
threatened releases of hazardous substances. This federal statute permits the
recovery of response costs from some liable parties and may require liable
parties to undertake their own remedial action. Liability under CERCLA may be
joint and several with other responsible parties.

The Company has been, and continues to be, involved in litigation involving
insurance coverage issues pertaining to environmental claims. The Company
believes that some court decisions have interpreted the insurance coverage to
be broader than the original intent of the insurers and policyholders. These
decisions often pertain to insurance policies that were issued by the Company
prior to the mid-1970s. These decisions continue to be inconsistent and vary
from jurisdiction to jurisdiction. Environmental claims when submitted rarely
indicate the monetary amount being sought by the claimant from the
policyholder, and the Company does not keep track of the monetary amount being
sought in those few claims which indicate a monetary amount.

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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 March 31, 2003, approximately 71% of
the net environmental reserve (approximately $270.5 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 29% of the net environmental reserve
(approximately $113.0 million), consists of case reserves for resolved claims.
Net environmental losses paid were $2.0 million and $45.5 million for the three
months ended March 31, 2003 and 2002, respectively. The amount of
environmental losses paid tends to fluctuate by quarter and is impacted by the
timing and terms of settlement agreements reached with policyholders.

The Companys reserving methodology is preferable to one based on identified
claims because the resolution of environmental exposures by the Company
generally occurs by settlement on a policyholder-by-policyholder basis as
opposed to a claim-by-claim basis. Generally, the settlement between the
Company and the policyholder extinguishes any obligation the Company may have
under any policy issued to the policyholder for past, present and future
environmental liabilities as well as extinguishes any pending coverage
litigation dispute with the policyholder. This form of settlement is commonly
referred to as a buy-back of policies for future environmental liability. In
addition, many of the agreements have also extinguished any insurance
obligation which the Company may have for other claims, including but not
limited to asbestos and other cumulative injury claims. Provisions of these
agreements also include appropriate indemnities and hold harmless provisions to
protect the Company. The Companys general purpose in executing these
agreements is to reduce the Companys potential environmental exposure and
eliminate the risks presented by coverage litigation with the policyholder and
related costs.

In establishing environmental reserves, the Company evaluates the exposure
presented by each policyholder and the anticipated cost of resolution, if any,
for each policyholder on a regular 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 policyholder 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 policyholder, including the role of any umbrella or excess
insurance the Company has issued to the policyholder; 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. Conventional actuarial techniques are not used to estimate
these reserves.

The duration of the Companys investigation and review of these claims and the
extent of time necessary to determine an appropriate estimate, if any, of the
value of the claim to the Company, vary significantly and are dependent upon a
number of factors. These factors include, but are not limited to, the
cooperation of the policyholder in providing claim information, the pace of
underlying litigation or claim processes, the pace of coverage litigation
between the policyholder and the Company and the willingness of the
policyholder and the Company to negotiate, if appropriate, a resolution of any
dispute pertaining to these claims. Because these factors vary from
claim-to-claim and policyholder-by-policyholder, the Company cannot provide a
meaningful average of the duration of an environmental claim. However, based
upon the Companys experience in resolving these claims, the duration may vary
from months to several years.

Over the past three years, the Company has experienced a substantial reduction
in the number of policyholders with pending coverage litigation disputes, a
continued reduction in the number of policyholders tendering for the first time
an environmental remediation-type claim to the Company, as well as a continued
reduction in the number of policyholders with active environmental claims.

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

|                                                          |        |      |   |       |   |  |   |       |   | 
|--------------------------------------------------------- | ------ | ---- | - | ----- | - |  | - | ----- | - | 
|(at and for the three months ended March 31, in millions) |        | 2003 |   | 2002 
|                                                          |        |      |   |      
|Beginning reserves:                                       |        |      |   |       |   |  |   |      
|                                                          | Direct |      | $ | 447.8 |   |  | $ | 478.8 |  
|                                                          | Ceded  |      |   | (62.3 | ) |  |   | (82.8 | )
|                                                          |        |      |   |       |   |  |   |       |   | 
|                                                          | Net    |      |   | 385.5 |   |  |   | 396.0 |  
|Incurred losses and loss expenses:                        |        |      |   |       |   |  |   |      
|                                                          | Direct |      |   |      |   |  |   | 14.0  |  
|                                                          | Ceded  |      |   |      |   |  |   | (0.3  | )
|Losses paid:                                              |        |      |   |       |   |  |   |      
|                                                          | Direct |      |   | 10.4  |   |  |   | 59.3  |  
|                                                          | Ceded  |      |   | (8.4  | ) |  |   | (13.8 | )
|                                                          |        |      |   |       |   |  |   |       |   | 
|Ending reserves:                                          |        |      |   |       |   |  |   |      
|                                                          | Direct |      |   | 437.4 |   |  |   | 433.5 |  
|                                                          | Ceded  |      |   | (53.9 | ) |  |   | (69.3 | )
|                                                          |        |      |   |       |   |  |   |       |   | 
|                                                          | Net    |      | $ | 383.5 |   |  | $ | 364.2 |  
|                                                          |        |      |   |       |   |  |   |       |   | 

UNCERTAINTY REGARDING ADEQUACY OF ASBESTOS AND ENVIRONMENTAL RESERVES

As a result of the processes and procedures described above, management
believes that the reserves carried for asbestos and environmental claims at
March 31, 2003 are appropriately established based upon known facts, current
law and managements judgment. However, the uncertainties surrounding the
final resolution of these claims continue, and it is presently not possible to
estimate the ultimate exposure for asbestos and environmental claims and
related litigation. As a result, the reserve is subject to revision as new
information becomes available. The continuing uncertainties 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 asbestos and environmental 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 policyholders in
bankruptcy where negotiations often involve a large number of claimants and
other parties and require court approval to be effective. Also see Legal
Proceedings.

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.

Note  Beginning in the first quarter of 2003, the Companys cumulative injury
other than asbestos (CIOTA) reserves have been combined with the Companys
general reserves due to lower levels of activity during recent periods. Previously, CIOTA reserves were separately disclosed in the
Companys Forms 10-K and 10-Q.

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LIQUIDITY AND CAPITAL RESOURCES

The Company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. The timing and amount of reinsurance
recoveries may be affected by reinsurer solvency and increasing reinsurance coverage
disputes. Additionally, recent increases in asbestos-related claim payments,
as well as potential judgments and settlements arising out of litigation, may
also result in increased liquidity requirements. Net cash flows provided by
operating activities totaled $892.7 million and $255.3 million in the first
quarter of 2003 and 2002, respectively. The improvement in net cash flows
provided by operating activities primarily reflects the benefits of premium
rate increases and the receipt of $360.7 million related to recoveries from
full utilization of the Citigroup indemnification agreement. For additional
information on the Citigroup indemnification agreement see note 10 to the
condensed consolidated financial statements. Additional sources of cash flow
include the sale of invested assets and financing activities. It is the
opinion of the Companys management that the Companys 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 March 31, 2003 totaled $39.361
billion, of which 91% was invested in fixed maturity and short-term
investments, 2% in common stocks and other equity securities, 1% in mortgage
loans and real estate and 6% in other investments. The average duration of
fixed maturities and short-term securities, net of securities lending
activities and net receivables and payables on investment sales and purchases
was 4.3 as of March 31, 2003, a 0.7 decrease from 5.0 as of December 31, 2002.
Commencing in the first quarter of 2003, the computation of average duration
has been changed to reflect the impact of tax-exempt investments. The December
31, 2002 average duration presented above has been recalculated under this
methodology. The reduction in average duration resulted from the investment of
underwriting cash flows and investment maturities and sales proceeds in
shorter-term investments along with the purchase of certain treasury futures
contracts.

An investment in a debt or equity security is impaired if its fair value falls
below its book value and the decline is considered other-than-temporary.
Factors considered in determining whether a loss is other-than-temporary
include the length of time and extent to which fair value has been below cost;
the financial condition and near-term prospects of the issuer; and the
Companys ability and intent to hold the investment for a period of time
sufficient to allow for any anticipated recovery. A debt security is impaired
if it is probable that the Company will not be able to collect all amounts due
under the securitys contractual terms. Equity investments are impaired when it
becomes apparent that the Company will not recover its cost over the expected
holding period.

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The Companys process for reviewing invested assets for impairments during any
quarter includes the following:



| |  |  | Identification and evaluation of investments which have possible
indications of impairment;                                                                                                                                                                                                                       
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Analysis of investments with gross unrealized investment losses that
have fair values less than 80% of amortized cost during successive
quarterly periods over a rolling one-year period;                                                                                                                         
|
| |  |  | Review of investment advisor(s) recommendations for
other-than-temporary impairments based on the investees current
financial condition, liquidity, near-term recovery prospects and other
factors, as well as consideration of other investments that were not
recommended for other-than-temporary impairments;
|
| |  |  | Discussion of evidential matter, including an evaluation of factors
or triggers that would or could cause individual investments to qualify
as having other-than-temporary impairments and those that would not
support other-than-temporary impairment;                                                          
|
| |  |  | Determination of the status of each analyzed investment as
other-than-temporary or not, with documentation of the rationale for the
decision.                                                                                                                                                                     

Impairment charges of $58.2 million and $62.2 million were recognized in net
income during the first quarter of 2003 and 2002, respectively.

The amortized cost and fair value of fixed maturities and equity securities
were as follows:

|                                 |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |          | 
|-------------------------------- | ----- | ---- | --------- | -------- |  | ------ | ---------------- | ------- |  | - | ----- | ----- |  | - | -------- | -------- | 
|                                 |       |      |           |          |  |        | Gross Unrealized |         |  |   |      
|                                 |       |      | Amortized |          |  |        | Fair            
|(at March 31, 2003, in millions) |       | Cost |           | Gains    |  | Losses |                  | Value  
|                                 |       |      |           |          |  |        |                  |        
|Fixed maturies                   |       | $    | 29,041.6  |          |  | $      | 1,480.8          |         |  | $ | 170.6 |       |  | $ | 30,351.8 |         
|Equity securities                |       |      | 798.4     |          |  |        | 50.2             |         |  |   | 37.7  |       |  |   | 810.9    |         
|                                 |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |         
|                                 | Total |      | $         | 29,840.0 |  |        | $                | 1,531.0 |  |   | $     | 208.3 |  |   | $        | 31,162.7 | 
|                                 |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |         

|                                    |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |          | 
|----------------------------------- | ----- | ---- | --------- | -------- |  | ------ | ---------------- | ------- |  | - | ----- | ----- |  | - | -------- | -------- | 
|                                    |       |      |           |          |  |        | Gross Unrealized |         |  |   |      
|                                    |       |      | Amortized |          |  |        | Fair            
|(at December 31, 2002, in millions) |       | Cost |           | Gains    |  | Losses |                  | Value  
|                                    |       |      |           |          |  |        |                  |        
|Fixed maturies                      |       | $    | 28,877.8  |          |  | $      | 1,408.8          |         |  | $ | 283.4 |       |  | $ | 30,003.2 |         
|Equity securities                   |       |      | 861.9     |          |  |        | 28.6             |         |  |   | 39.0  |       |  |   | 851.5    |         
|                                    |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |         
|                                    | Total |      | $         | 29,739.7 |  |        | $                | 1,437.4 |  |   | $     | 322.4 |  |   | $        | 30,854.7 | 
|                                    |       |      |           |          |  |        |                  |         |  |   |       |       |  |   |          |         

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At March 31, 2003, the gross unrealized investment loss for fixed maturities
and equity securities where fair value is less than 80% of amortized cost
were as follows:

|                  |  |                                                                |      |           |  |              |      |              |  |       |      |  |  |   |      |  |  |   |       | 
|----------------- |  | -------------------------------------------------------------- | ---- | --------- |  | ------------ | ---- | ------------ |  | ----- | ---- |  |  | - | ---- |  |  | - | ----- | 
|                  |  | Period For Which Fair Value Is Less Than 80% of Amortized Cost
|                  |  |                                                               
|                  |  |                                                                |      |           |  | Greater than |      | Greater than |  |       |      |  |  |   |      | 
|                  |  |                                                                |      |           |  | 3 Months     |      | 6 Months     |  |       |      |  |  |   |      | 
|                  |  | Less than                                                      |      | Less Than |  | Less Than    |      | Greater than |  |       |      | 
|(in millions)     |  | 3 Months                                                       |      | 6 Months  |  | 12 Months    |      | 12 Months    |  | Total
|                  |  |                                                                |      |           |  |              |      |              |  |      
|Fixed maturities  |  | $                                                              | 36.2 |           |  | $            | 38.0 |              |  | $     | 19.9 |  |  | $ | 8.7  |  |  | $ | 102.8 | 
|Equity securities |  |                                                                | 8.9  |           |  |              | 3.7  |              |  |       |     |  |  |   | 3.4  |  |  |   | 16.0  | 
|                  |  |                                                                |      |           |  |              |      |              |  |       |      |  |  |   |      |  |  |   |       | 
|                  |  | $                                                              | 45.1 |           |  | $            | 41.7 |              |  | $     | 19.9 |  |  | $ | 12.1 |  |  | $ | 118.8 | 
|                  |  |                                                                |      |           |  |              |      |              |  |       |      |  |  |   |      |  |  |   |       | 

Impairment charges included in net realized investment gains by quarter were
as follows:

|                  |  |      |      |      |  |      |       |      |  |      |      |  |  |   |      |  |  |   |      | 
|----------------- |  | ---- | ---- | ---- |  | ---- | ----- | ---- |  | ---- | ---- |  |  | - | ---- |  |  | - | ---- | 
|(in millions)     |  | 1Q02 |      | 2Q02 |  | 3Q02 |       | 4Q02 |  | 1Q03
|                  |  |      |      |      |  |      |       |      |  |     
|Fixed maturities  |  | $    | 59.0 |      |  | $    | 117.8 |      |  | $    | 33.3 |  |  | $ | 50.3 |  |  | $ | 46.6 | 
|Equity
securities |  |      | 3.2  |      |  |      | 2.4   |      |  |      | 1.4  |  |  |   | 1.1  |  |  |   | 0.1  | 
|Real Estate       |  |      |     |      |  |      | 6.5   |      |  |      |     |  |  |   | 9.1  |  |  |   | 11.5 | 
|                  |  |      |      |      |  |      |       |      |  |      |      |  |  |   |      |  |  |   |      | 
|                  |  | $    | 62.2 |      |  | $    | 126.7 |      |  | $    | 34.7 |  |  | $ | 60.5 |  |  | $ | 58.2 | 
|                  |  |      |      |      |  |      |       |      |  |      |      |  |  |   |      |  |  |   |      | 

TPC and TIGHIs cash flow needs include shareholder dividends and debt service.
TPC and TIGHI are holding companies and have no direct operations and meet
cash flow needs primarily through dividends from operating subsidiaries.

At March 31, 2003, total cash and short-term invested assets aggregating $949.7
million were held at TPC and TIGHI. These amounts include the temporary
investment of $900.0 million of proceeds from the $1.400 billion senior notes
issued on March 11, 2003. The $900.0 million was used on April 9, 2003 to
redeem TIGHIs Trust Securities. The remaining balance of these liquid assets
were primarily funded by dividends received from the Companys operating
subsidiaries. These liquid assets, combined with other sources of funds
available to TPC, primarily additional dividends from the Companys operating
subsidiaries, are considered sufficient to meet the liquidity requirements of
the Companys holding companies.

In December 2002, the Company entered into a loan agreement with an
unaffiliated lender and borrowed $550.0 million under a Promissory Note due in
January 2004. The Promissory Note carried a variable interest rate of LIBOR
plus 25 basis points per annum. On February 5, 2003, the Company issued $550.0
million of Floating Rate Notes due in February 2004, which is included in
short-term debt in the condensed consolidated balance sheet. The proceeds from
these notes were used to prepay the $550.0 million due on the Promissory Note.
The Floating Rate Notes also carry a variable interest rate of LIBOR plus 25
basis points per annum. On March 14, 2003, the Company repurchased $75.0
million of the Floating Rate Notes at par plus accrued interest. The remaining
$475.0 million are callable by the Company after August 5, 2003.

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On March 11, 2003 TPC issued $1.4 billion of senior notes comprised of $400.0
million of 3.75% senior notes due March 15, 2008, $500.0 million of 5.00%
senior notes due March 15, 2013 and $500.0 million of 6.375% senior notes due
March 15, 2033. The notes pay interest semi-annually on March 15 and September
15 of each year, beginning September 15, 2003, are senior unsecured obligations
and rank equally with all of TPCs other senior unsecured indebtedness. TPC
may redeem some or all of the notes prior to maturity by paying a make-whole
premium based on U.S. Treasury rates. The net proceeds from the sale of these
notes were contributed to its primary subsidiary, TIGHI, so that TIGHI could
repay $500.0 million indebtedness to Citigroup and to redeem $900.0 million
aggregate principal amount of TIGHIs junior subordinated debt securities held
by subsidiary trusts. These trusts, in turn, used these funds to redeem $900.0
million of preferred capital securities on April 9, 2003.

These senior notes were sold to qualified institutional buyers as defined under
Rule 144A under the Securities Act of 1933 (the Securities Act) and outside the
United States in reliance on Regulation S under the Securities Act.
Accordingly, the notes (the restricted notes) were not registered under the
Securities Act or any state securities laws and could not be transferred or
resold except pursuant to certain exemptions. As part of this offering, TPC
agreed to file a registration statement under the Securities Act to permit the
exchange of the notes for registered notes (the Exchange Notes) having terms
identical to those of the senior notes described above (Exchange Offer). On
April 14, 2003, TPC initiated the Exchange Offer pursuant to a Form S-4 that
was filed with the Securities and Exchange Commission. Accordingly, each
series of Exchange Notes has been registered under the Securities Act, and the
transfer restrictions and registration rights relating to the restricted notes
do not apply to the Exchange Notes.

Effective April 17, 2003, TPC entered into the following line of credit
agreements with Citibank, a subsidiary of Citigroup, its former parent:



| |  |  | A $250.0 million 45-month revolving line of credit for which it pays
a commitment fee. Borrowings under this line of credit may be made, at
TPCs option, at a variable interest rate equal to either the lenders
base rate plus an applicable margin or at LIBOR plus an applicable
margin. The line of credit includes a utilization fee that is added to
the applicable margin for any date where advances exceed 50% of the
total commitment. The commitment fee, applicable margin and utilization
fee are based upon a pre-established pricing grid that is dependant upon
TPCs long-term senior unsecured non-credit-enhanced debt ratings.                                                                                                                                                                                                                                                                                                                                                                                                          
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | A $250.0 million 364-day revolving line of credit for which it pays a
commitment fee. TPC has the option, provided there is no default or
event of default, to convert outstanding advances at the commitment
termination date to a term loan maturing no later than one year from the
commitment termination date. With the consent of Citibank, TPC may also
extend the commitment of the facility for another 364-day period under
the same terms and conditions that are currently in place. Borrowings
under this line of credit may be made, at TPCs option, at a variable
interest rate equal to either the lenders base rate plus an applicable
margin or at LIBOR plus an applicable margin. The line of credit
includes a utilization fee that is added to the applicable margin for
any date where advances exceed 50% of the total commitment. The
commitment fee, applicable margin and utilization fee are based upon a
pre-established pricing grid that is dependant upon TPCs long-term
senior unsecured non-credit-enhanced debt ratings.

Previous lines of credit between TIGHI and Citigroup have been terminated.

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Contractual obligations at March 31, 2003 included the following:

|                                                                                                                                                           |  |       |         |      |  |        |         |       |  |       |       |         |  |   |       |  |  |   |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- | ------- | ---- |  | ------ | ------- | ----- |  | ----- | ----- | ------- |  | - | ----- |  |  | - | ------- | 
|                                                                                                                                                           |  |       |         |      |  | Less   |         |       |  |       |       |         |  |   |       |  |  |  
|Payments Due by Period                                                                                                                                     |  |       |         |      |  | than 1 |         | 1-3   |  | 4-5   |       | After 5
|(in millions)                                                                                                                                              |  | Total |         | Year |  | Years  |         | Years |  | Years
|                                                                                                                                                           |  |       |         |      |  |        |         |       |  |      
|Short-term debt                                                                                                                                            |  | $     | 475.0   |      |  | $      | 475.0   |       |  | $     |      |         |  | $ |      |  |  | $ |        | 
|Long-term debt                                                                                                                                             |  |       | 1,777.0 |      |  |        | 3.0     |       |  |       | 162.0 |         |  |   | 406.0 |  |  |   | 1,206.0 | 
|Convertible junior subordinated notes payable                                                                                                              |  |       | 892.5   |      |  |        |        |       |  |       |      |         |  |   |      |  |  |   | 892.5   | 
|Convertible notes payable                                                                                                                                  |  |       | 49.6    |      |  |        |        |       |  |       |      |         |  |   |      |  |  |   | 49.6    | 
|TIGHI-obligated mandatorily redeemable
securities of subsidiary trusts holding solely junior subordinated debt
securities of TIGHI, redeemed
April 9, 2003 |  |       | 900.0   |      |  |        | 900.0   |       |  |       |      |         |  |   |      |  |  |   |        | 
|Operating leases                                                                                                                                           |  |       | 296.4   |      |  |        | 83.6    |       |  |       | 146.9 |         |  |   | 41.4  |  |  |   | 24.5    | 
|                                                                                                                                                           |  |       |         |      |  |        |         |       |  |       |       |         |  |   |       |  |  |   |         | 
|                                                                                                                                                           |  | $     | 4,390.5 |      |  | $      | 1,461.6 |       |  | $     | 308.9 |         |  | $ | 447.4 |  |  | $ | 2,172.6 | 
|                                                                                                                                                           |  |       |         |      |  |        |         |       |  |       |       |         |  |   |       |  |  |   |         | 

In the normal course of business, the Company has unfunded commitments to
partnerships in which it invests. These commitments were $730.2 million and
$864.3 million at March 31, 2003 and December 31, 2002, respectively.

On January 23, 2003, the Companys Board of Directors declared a quarterly
dividend of $0.06 per share on class A and class B common stock, paid on
February 28, 2003, to shareholders of record on February 5, 2003. Also, on
April 24, 2003, the Companys Board of Directors declared a quarterly dividend
of $0.06 per share on class A and class B common stock, payable May 30, 2003,
to shareholders of record on May 6, 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 January 23, 2003, the Company, through its Capital Accumulation Program
(CAP), issued 1,943,627 shares of class A common stock in the form of
restricted stock to participating officers and other key employees. The fair
value per share of the class A common stock was $16.18. The restricted stock
generally vests 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.
The unamortized unearned compensation expense associated with these awards is
included as unearned compensation as a separate component of equity in the
condensed consolidated balance sheet. Unearned compensation expense is
recognized as a charge to income ratably over the vesting period.

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 through September 2004 in the open market, and it is expected that
funding for the program will principally come from operating cash flow. When
shares are repurchased, such shares will be authorized and unissued and
reported as treasury stock in the consolidated balance sheet. There were no
shares repurchased under this program as of March 31, 2003.

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. A maximum of
$727.7 million will be available by the end of 2003 for such dividends without
prior approval of the Connecticut Insurance Department. However, a portion of
this amount is likely to be subject to approval by the Connecticut Insurance
Department, depending upon the amount and timing of the payments. TPCs
insurance subsidiaries did not pay any dividends to TIGHI during the first
quarter of 2003; however, on April 1, 2003, the insurance subsidiaries paid
$320.0 million of dividends to TIGHI.

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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.

CRITICAL ACCOUNTING POLICIES

The Company considers its most significant accounting policies to be those
applied to unpaid claim and claim adjustment liabilities and related
reinsurance recoverables. 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, 2002 included in the Companys Form 10-K.

Total claims and claim adjustment expense reserves were $33.801 billion at
March 31, 2003. 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. Management considers
actuarial estimates, current conditions and trends, as well as past company and
certain industry experience in establishing reserve estimates. 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 policyholder 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, 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.

Some of the Companys loss reserves are for environmental and asbestos claims
and related litigation. While the study of asbestos claims and associated
liabilities and the analysis of environmental claims considered the
inconsistencies of court decisions as to coverage, plaintiffs expanded
theories of liability, and the risks inherent in major litigation and other
uncertainties, in the opinion of the Companys management it is possible that
the outcome of the continued uncertainties regarding asbestos-related claims
could result in liability in future periods that differs from current reserves
by an amount that could be material to the Companys future operating results
and financial condition. See the preceding discussion of Asbestos Claims and
Litigation and Environmental Claims and Litigation.

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Total reinsurance recoverables were $10.954 billion at March 31, 2003. Amounts
recoverable from reinsurers are estimated in a manner consistent with the claim
liability associated with the reinsured business.

The Company evaluates and monitors the financial condition of its reinsurers
under voluntary reinsurance arrangements to minimize its exposure to
significant losses from reinsurer insolvencies. In addition, in the ordinary
course of business, the Company may become involved in coverage disputes with
its reinsurers. In recent quarters, the Company has experienced an increase in
the frequency of these reinsurance coverage disputes. Some of these disputes
could result in lawsuits and arbitrations brought by or against the reinsurers
to determine the Companys rights and obligations under various reinsurance
agreements. The Company employs dedicated specialists and aggressive
strategies to manage reinsurance collections and disputes.

The Company reports its reinsurance recoverables net of an allowance for
estimated uncollectible reinsurance recoverables. The allowance is based upon
the Companys ongoing review of amounts outstanding, length of collection
periods, changes in reinsurer credit standing, applicable coverage defenses and
other relevant factors. Accordingly, the establishment of reinsurance
recoverables and the related allowance for uncollectible reinsurance
recoverables is also an inherently uncertain process involving estimates.
Changes in these estimates could result in additional income statement charges.

The Companys insurance subsidiaries are required to participate in various
involuntary assigned risk pools, principally involving workers compensation
and automobile insurance, which provide various insurance coverages to insureds
that otherwise are unable to purchase coverage in the open market. The costs
of these mandatory pools in most states are usually charged back to the
participating members in proportion to voluntary writings of related business
in that state. In the event that a member of that pool becomes insolvent, the
remaining members assume an additional pro rata share of the pools
liabilities.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

See notes 2 and 3 to the condensed consolidated financial statements for a discussion
of recently issued accounting pronouncements.

FORWARD-LOOKING STATEMENTS

This report contains, and oral statements by management of the Company may
contain, certain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other than
statements of historical facts, may be forward-looking statements.
Specifically, the Company has forward-looking statements about the Companys
results of operations, financial condition, liquidity, and the sufficiency of
the Companys asbestos reserves under the heading Managements Discussion and
Analysis of Financial Condition and Results of Operations and elsewhere.

Many risks and uncertainties may impact the matters addressed in these
forward-looking statements. Actual results may differ materially from those
expressed or implied. In particular, the sufficiency of the Companys asbestos
reserves, as well as the Companys results of operations, financial condition
and liquidity, to the extent impacted by the sufficiency of the Companys
asbestos reserves, is subject to a number of potential adverse developments
including, among others, adverse developments involving asbestos claims and
related litigation, the willingness of parties, including the Company, to
settle disputes, the impact of aggregate policy coverage limits, and the impact
of bankruptcies of various asbestos producers and related businesses.

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Some of the other factors that could cause actual results to differ include,
but are not limited to, the following: the Companys inability to obtain price
increases due to competition or otherwise; the performance of the Companys
investment portfolios, which could be adversely impacted by adverse
developments in U.S. and global financial markets, interest rates and rates of
inflation; weakening U.S. and global economic conditions; insufficiency of, or
changes in, loss reserves; the occurrence of catastrophic events, both natural
and man-made, including terrorist acts, with a severity or frequency exceeding
the Companys expectations; exposure to, and adverse developments involving,
environmental claims and related litigation; adverse changes in loss cost
trends, including inflationary pressures in medical costs and auto and home
repair costs; developments relating to coverage and liability for mold claims;
the effects of corporate bankruptcies on surety bond claims; adverse
developments in the cost, availability and/or ability to collect reinsurance;
the ability of the Companys subsidiaries to pay dividends to the Company;
adverse outcomes in legal proceedings; judicial expansion of policy coverage
and the impact of new theories of liability; 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; and amendments to, and changes to the
risk-based capital requirements. The Companys forward-looking statements
speak only as of the date of this report or as of the date they are made, and
the Company undertakes no obligation to update these forward-looking
statements.




|        |  |                                                           
|------- |  | ----------------------------------------------------------
|Item 3. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following quantitative and qualitative disclosures about market risk of
Travelers Property Casualty Corp. (TPC) and subsidiaries (collectively, the
Company) should be read in conjunction with the quantitative and qualitative
disclosures about market risk as of December 31, 2002 included in the Companys
Form 10-K.

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 short-term and long-term debt and
notes payable to affiliates have occurred since December 31, 2002. The primary
market risk for these market sensitive instruments is interest rate risk at the
time of refinancing. For information regarding the Companys long-term debt
and notes payable to former affiliates, see note 8 to the condensed
consolidated financial statements. In addition, the average duration of the
Companys fixed maturities portfolio decreased from December 31, 2002,
primarily as a result of the impact of the investment of underwriting cash
flows and investment maturities and sales proceeds in shorter-term investments
along with the purchase of certain treasury futures contracts. See the
Liquidity and Capital Resources section of Item 2, Managements Discussion and
Analysis of Financial Condition and Results of Operations.

The Company analyzes quantitative information about market risk based on a
sensitivity analysis model. This model produces a loss in fair value of market
sensitive instruments of approximately $1.3 billion and $1.5 billion based on a
100 basis point increase in interest rates as of March 31, 2003 and December
31, 2002, respectively.

The Companys sensitivity model also calculates a potential loss in fair value
with the inclusion of certain non-financial instruments, including premium
balances receivable, reinsurance recoverables, claims and claim adjustment
expense reserves and unearned premium reserves. Based on this model, the loss
in fair value of market sensitive instruments, including these non-financial
instruments, as a result of a 100 basis point increase in interest rates as of
March 31, 2003 and December 31, 2002 is not material.

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|        |  |                        
|------- |  | -----------------------
|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.

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PART II - OTHER INFORMATION




Item 1.     LEGAL PROCEEDINGS

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

Beginning in January 1997, various plaintiffs commenced a series of purported
class actions and one multi-party action in various courts against some of the
Companys subsidiaries, dozens of other insurers and the National Council on
Compensation Insurance, or the NCCI. The allegations in the actions are
substantially similar. The plaintiffs generally allege that the defendants
conspired to collect excessive or improper premiums on loss-sensitive workers
compensation insurance policies in violation of state insurance laws, antitrust
laws, and state unfair trade practices laws. Plaintiffs seek unspecified
monetary damages. After several voluntary dismissals, refilings and
consolidations, actions are, or until recently were, pending in the following
jurisdictions: Georgia (Melvin Simon & Associates, Inc., et al. v. Standard
Fire Insurance Company, et al.); Tennessee (Bristol Hotel Asset Company, et al.
v. The Aetna Casualty and Surety Company, et al.); Florida (Bristol Hotel Asset
Company, et al.v. Allianz Insurance Company, et al. and Bristol Hotel
Management Corporation, et al. v. Aetna Casualty & Surety Company, et al.); New
Jersey (Foodarama Supermarkets, Inc., et al.v. Allianz Insurance Company, et
al.); Illinois (CR/PL Management Co., et al.v. Allianz Insurance Company
Group, et al.); Pennsylvania (Foodarama Supermarkets, Inc.v. American
Insurance Company, et al.); Missouri (American Freightways Corporation, et al.
v. American Insurance Co., et al.); California (Bristol Hotels & Resorts, et
al. v. NCCI, et al.); Texas (Sandwich Chef of Texas, Inc., et al.v. Reliance
National Indemnity Insurance Company, et al.); Alabama (Alumax Inc., et al. v.
Allianz Insurance Company, et al.); Michigan (Alumax, Inc., et al. v. National
Surety Corp., et al.); Kentucky (Payless Cashways, Inc., et al. v. National
Surety Corp. et al.); New York (Burnham Service Corp.v. American Motorists
Insurance Company, et al.); and Arizona (Albany International Corp. v. American
Home Assurance Company, et al.).

The trial courts ordered dismissal of the California, Pennsylvania and New York
cases and, in February 2003, one of the two Florida cases (Bristol Hotel Asset
Company, et al. v. Allianz Insurance Company, et al.).In addition, the trial
courts have ordered partial dismissals of six other cases: those pending in
Tennessee, New Jersey, Illinois, Missouri, Alabama and Arizona. The trial
courts in Georgia, Kentucky, Texas, and Michigan denied defendants motions to
dismiss. The California appellate court reversed the trial court in part and
ordered reinstatement of most claims, while the New York appellate court
affirmed dismissal in part and allowed plaintiffs to dismiss their remaining
claims voluntarily. The Michigan, Pennsylvania and New Jersey courts denied
class certification. Although the trial court in Texas granted class
certification, the appellate court reversed that ruling in January 2003,
holding that class certification should not have been granted. The New Jersey
appellate court denied plaintiffs request to appeal. After the rulings
described above, the plaintiffs withdrew the New York and Michigan cases. The
Company is vigorously defending all of the pending cases and the Companys
management believes the Company has meritorious defenses; however the outcome
of these disputes is uncertain.

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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 (Wisev.
Travelers,and Meningerv. 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, West Virginia, allege that the insurer defendants violated
unfair trade practices requirements and inappropriately handled and settled
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. Lawsuits similar to Wisehave been filed in
Massachusetts (2002) and Hawaii (2002, not served). 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, other than the Hawaii
actions, are currently subject to a temporary restraining order entered by the
federal bankruptcy court in New York, which had previously presided over and
approved the reorganization in bankruptcy of former Travelers policyholder
Johns Manville. In August 2002, the bankruptcy court conducted a hearing on
Travelers motion for a preliminary injunction prohibiting further prosecution
of the lawsuits pursuant to the reorganization plan and related orders. At the
conclusion of this hearing, the court ordered the parties to mediation,
appointed a mediator, and continued the temporary restraining order. In
January 2003, the same bankruptcy court extended the existing injunction to
apply to an additional set of cases filed in various state courts in Texas as
well as to the attorneys who are prosecuting these cases. The order also
enjoins these attorneys and their respective law firms from commencing any
further lawsuits against the Company based upon these allegations without the
prior approval of the court.

The Company is vigorously defending all of the direct action 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.

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The Company is involved in a number of proceedings relating to ACandS, Inc.
(ACandS), formerly a national installer of products containing asbestos.
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. An insurance coverage arbitration commenced in
January 2001. The presentation of this case before an arbitration panel
commenced in April 2003. In January 2003, ACandS filed a proposed Plan of
Reorganization in its Bankruptcy proceeding. Pursuant to that plan, ACandS
seeks to establish a trust for the handling and disposition of asbestos claims.
That trust, according to the proposed plan, will be assigned ACandS rights to
its insurance policies issued by the Company. In addition to the bankruptcy
and the arbitration proceedings, 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.

The Company is defending its asbestos and environmental-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 asbestos and
environmental loss exposure, including settling litigation under appropriate
circumstances. For a discussion of recent settlement activity and other
information regarding the Companys asbestos and environmental exposure, see
Managements Discussion and Analysis of Financial Condition and Results of
Operations  Asbestos Claims and Litigation,  Environmental Claims and
Litigation and  Uncertainty Regarding Adequacy of Asbestos and Environmental
Reserves.

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 uncertainties, 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 results of
operations and financial condition in future periods.

The Company is involved in numerous 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.
While the ultimate resolution of these legal proceedings could be significant
to the Companys results of operations in a future quarter, in the opinion of
the Companys management it would not be likely to have a material adverse
effect on the Companys results of operations for a calendar year or on the
Companys financial condition.

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Item 6.     EXHIBITS AND REPORTS ON FORM 8-K.



|(a) |  | Exhibits:           
|--- |  | --------------------
|   
|    |  | See Exhibit Index.  
|   
|(b) |  | Reports on Form 8-K:

On January 14, 2003, the Company filed a Current Report on Form 8-K dated
January 14, 2003, (a) reporting under Item 5 thereof the results of the
Companys previously announced study regarding asbestos reserves, an estimate
of earnings for the 2002 fourth quarter, and earnings outlook for 2003, and (b)
filing under Item 7 thereof the related press release.

On January 24, 2003, the Company filed a Current Report on Form 8-K dated
January 23, 2003, (a) reporting under Item 5 thereof the results of the
Companys operations for the quarter and year ended December 31, 2002, and (b)
filing under Item 7 thereof the related press release and a fourth quarter
financial supplement.

On February 3, 2003, the Company filed a Current Report on Form 8-K dated
February 3, 2003, reporting under Item 9 thereof an update to the Legal
Proceedings disclosure in the Companys Quarterly Report on Form 10-Q for the
quarter ended September 30, 2002.

On March 12, 2003, the Company filed a Current Report on Form 8-K dated March
12, 2003, (a) reporting under Item 5 thereof the Companys completion of a $1.4
billion debt offering, and (b) filing under Item 7 thereof the related press
release.

No other reports on Form 8-K were filed during the 2003 first quarter; however,

On April 1, 2003 the Company filed a Current Report on Form 8-K dated April 1,
2003, (a) reporting under Item 5 thereof that the Company strengthened certain
reserves of its majority-owned subsidiary, Gulf Insurance, and (b) filing under
Item 7 thereof the related press release.

On April 17, 2003, the Company filed a Current Report on Form 8-K, dated April
17, 2003, (a) reporting under Item 12 thereof (but provided under Item 9
pursuant to SEC interim filing guidance for Item 12) the results of the
Companys operations for the quarter ended March 31, 2003, and (b) filing under
Item 7 thereof the related press release and a first quarter financial
supplement.

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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: May 8, 2003 |  | By                                |  | /s/ Jay S. Benet

     Jay S. Benet
     Chief Financial Officer
     (Principal Financial Officer)              
|                  |  |                                   |  |                                                                                                                  
|Date: May 8, 2003 |  | By                                |  | /s/ Douglas K. Russell

     Douglas K. Russell
     Chief Accounting Officer
     (Principal Accounting Officer)

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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 officer 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)                                                                                                                                                                                                                                                                                                                                                                                      
|
| |    |  | b)                                                                                                                                                                                                                                                                                                                                                                                      
|
| |    |  | c)                                                                                                                                                                                                                                                                                                                                                                                      
|
| | 5. |  | The registrants other certifying officer 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)                                                                                                                                                                                                                                                                                                                                                                                      
|
| |    |  | b)                                                                                                                                                                                                                                                                                                                                                                                      
|
| | 6. |  | The registrants other certifying officer 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: May 8, 2003

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

50



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##### Table of Contents



CERTIFICATION





| | I, Jay S. Benet, certify that:
| | ------------------------------
|
| | 1.                            
|
| | 2.                            
|
| | 3.                            
|
| | 4.                            
|
| |                               
|
| |                               
|
| |                               
|
| | 5.                            
|
| |                               
|
| |                               
|
| | 6.                            

Date: May 8, 2003

| |                                                       
| | ------------------------------------------------------
| | /s/ Jay S. Benet

Jay S. Benet
Chief Financial Officer

51



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##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                 
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                 
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                 
|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 January 23, 2003,
was filed as Exhibit 3.2 to the Companys annual report on Form 10-K for
the fiscal year ended December 31, 2002, and is incorporated herein by
reference.                              
|        |  |                                                                                                                                                                                                                                                                 
|10.1    |  | Travelers Property Casualty Corp. 2002 Stock Incentive Plan, as amended
effective January 23, 2003, was filed as exhibit 10.22 to the Companys
annual report on Form 10-K for the fiscal year ended December 31, 2002, and
is incorporated herein by reference.
|        |  |                                                                                                                                                                                                                                                                 
|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.                                                                                                                            

The total amount of securities authorized pursuant to any instrument defining


rights of holders of long-term debt of the Company does not exceed 10% of the
total assets of the Company and its consolidated subsidiaries. Therefore,
the Company is not filing any instruments evidencing long-term debt.
However, the Company will furnish copies of any such instrument to the
Securities and Exchange Commission upon request.



---

|     Filed herewith.
|---------------------

52