AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 2002


                                                      REGISTRATION NO. 333-82388
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                AMENDMENT NO. 5

                                       TO
                                    FORM S-1
                             REGISTRATION STATEMENT
                        UNDER THE SECURITIES ACT OF 1933
                             ---------------------
                       TRAVELERS PROPERTY CASUALTY CORP.
             (Exact Name of Registrant as Specified in Its Charter)


                                                                            
              CONNECTICUT                                 6331                                  06-1008174
     (State or Other Jurisdiction             (Primary Standard Industrial                   (I.R.S. Employer
   of Incorporation or Organization)           Classification Code Number)                Identification Number)


                                ONE TOWER SQUARE
                          HARTFORD, CONNECTICUT 06183
                                 (860) 277-0111
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)

                            JAMES M. MICHENER, ESQ.
                                GENERAL COUNSEL
                       TRAVELERS PROPERTY CASUALTY CORP.
                                ONE TOWER SQUARE
                          HARTFORD, CONNECTICUT 06183
                                 (860) 277-0111
 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
                             of Agent For Service)
                             ---------------------
                                   COPIES TO:


                                                                            
      GREGORY A. FERNICOLA, ESQ.                STEPHANIE B. MUDICK, ESQ.                 ALLAN G. SPERLING, ESQ.
        ERIC J. FRIEDMAN, ESQ.                   JOAN GUGGENHEIMER, ESQ.                 LESLIE N. SILVERMAN, ESQ.
         SKADDEN, ARPS, SLATE,                     CO-GENERAL COUNSEL                    CLEARY, GOTTLIEB, STEEN &
          MEAGHER & FLOM LLP                         CITIGROUP INC.                              HAMILTON
           FOUR TIMES SQUARE                         399 PARK AVENUE                         ONE LIBERTY PLAZA
       NEW YORK, NEW YORK 10036                 NEW YORK, NEW YORK 10043                 NEW YORK, NEW YORK 10006
            (212) 735-3000                           (212) 559-1000                           (212) 225-2000


                             ---------------------
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:  As soon as
practicable after the effective date of this Registration Statement.

    If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]

    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]

    If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]

    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.  [ ]


                        CALCULATION OF REGISTRATION FEE





---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
                                                                        PROPOSED         PROPOSED MAXIMUM
          TITLE OF EACH CLASS OF                  AMOUNT TO              MAXIMUM             AGGREGATE             AMOUNT OF
        SECURITIES TO BE REGISTERED             BE REGISTERED        OFFERING PRICE      OFFERING PRICE(1)    REGISTRATION FEE(4)
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
Class A Common Stock, $.01 par value
  (including Rights to purchase Series A
  Junior Participating Preferred
  Stock)(2)................................       231,000,000              $19            $4,389,000,000           $403,788
---------------------------------------------------------------------------------------------------------------------------------
      % Convertible Junior Subordinated
  Notes due 2032(3)........................      $892,500,000             100%              $892,500,000            $82,110
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------




(1)Estimated solely for the purpose of calculating the registration fee pursuant
   to Rule 457(a) under the Securities Act of 1933, as amended.



(2)The Rights to purchase shares of our Series A Junior Participating Preferred
   Stock are initially attached to and trade with our shares of Common Stock,
   including the Class A Common Stock registered hereby. Value attributed to
   such Rights, if any, is reflected in the market price of our Common Stock.



(3)Also includes the shares of Class A Common Stock that are initially issuable
   upon conversion of the Convertible Junior Subordinated Notes. This
   registration statement also covers such shares of Class A Common Stock as may
   be issuable pursuant to anti-dilution adjustments.



(4)Previously paid.


    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


                                EXPLANATORY NOTE

     This Registration Statement contains a prospectus relating to an offering
of shares of our Class A Common Stock in the United States and Canada (the "U.S.
Prospectus"), together with separate prospectus pages relating to an offering of
our Class A Common Stock outside the United States and Canada (the
"International Prospectus"). It also contains a prospectus relating to a
concurrent offering of our Convertible Junior Subordinated Notes (the "Notes
Prospectus"). The complete U.S. Prospectus follows immediately. Following the
U.S. Prospectus are alternate pages for the International Prospectus followed by
alternate pages for the Notes Prospectus including:

     - the front and back cover pages;

     - pages for the "Prospectus Summary" section, describing the offering of
       the Notes;

     - pages containing risk factors applicable only to the offering of the
       Notes;

     - pages containing a description of the Notes;

     - pages describing U.S. federal income tax consequences of holding the
       Notes; and

     - pages comprising the section entitled "Underwriting."

     The complete prospectus for each of the Class A Common Stock offering and
the Notes offering will be filed with the Securities and Exchange Commission in
accordance with Rule 424 under the Securities Act of 1933.


THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.


                  SUBJECT TO COMPLETION, DATED MARCH 19, 2002


PROSPECTUS

                               210,000,000 SHARES

                       TRAVELERS PROPERTY CASUALTY CORP.

                                [TRAVELERS LOGO]

                              CLASS A COMMON STOCK
                                 $    PER SHARE
                               ------------------

     We are selling 210,000,000 shares of our class A common stock. Of the
210,000,000 shares of our class A common stock that we are selling, 168,000,000
shares are being offered in the United States and Canada by the U.S.
underwriters named in this prospectus and 42,000,000 shares are being offered at
the same time outside the United States and Canada by a syndicate of
international underwriters. We have granted the underwriters an option to
purchase up to 21,000,000 additional shares of our class A common stock to cover
over-allotments.

     Concurrently with this offering, we are offering $850 million aggregate
principal amount of our   % Convertible Junior Subordinated Notes due 2032.

     This is the initial public offering of our class A common stock. We
currently expect the initial public offering price to be between $16.00 and
$19.00 per share. We have applied to list our class A common stock on the New
York Stock Exchange under the symbol "TAP.A."
                               ------------------
     INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 11.

     Neither the Securities and Exchange Commission nor any state securities or
insurance commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
                               ------------------



                                                                PER SHARE           TOTAL
                                                              --------------    --------------
                                                                          
Public Offering Price.......................................  $                 $
Underwriting Discount.......................................  $                 $
Proceeds to Travelers Property Casualty Corp. (before
  expenses).................................................  $                 $


       The underwriters expect to deliver the shares to purchasers on or about
                                          , 2002.
                               ------------------
                               GLOBAL COORDINATOR

                              SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
               GOLDMAN, SACHS & CO.
                               LEHMAN BROTHERS
                                             MERRILL LYNCH & CO.
                                                       MORGAN STANLEY


                                                   
BANC OF AMERICA SECURITIES LLC    BEAR, STEARNS & CO.     BLAYLOCK & PARTNERS, L.P.
DEUTSCHE BANC ALEX. BROWN                INC.                              JPMORGAN
NEUBERGER BERMAN LLC               FOX-PITT, KELTON            THE WILLIAMS CAPITAL
                                      UBS WARBURG                       GROUP, L.P.


          , 2002


                               TABLE OF CONTENTS



                                                           
Summary.....................................................    1
Risk Factors................................................   11
Cautionary Statement Concerning Forward-Looking
  Statements................................................   21
Company History.............................................   21
Use of Proceeds.............................................   22
Dividend Policy.............................................   22
Dilution....................................................   23
Capitalization..............................................   24
Selected Historical Financial Information...................   25
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   27
Business....................................................   54
Management..................................................   83
Ownership of Common Stock...................................  101
Arrangements Between Our Company and Citigroup..............  102
Description of Capital Stock................................  113
Description of the Notes....................................  123
Certain Indebtedness........................................  125
Shares Eligible for Future Sale.............................  127
Certain United States Federal Tax Consequences to Non-U.S.
  Holders...................................................  129
Underwriting................................................  131
Legal Matters...............................................  136
Experts.....................................................  136
Where You Can Find More Information.........................  136
Glossary of Selected Insurance Terms........................  G-1
Index to Consolidated Financial Statements..................  F-1



                                        ii


                                    SUMMARY

     This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, including the "Risk Factors"
and "Cautionary Statement Concerning Forward-Looking Statements" sections and
our historical consolidated financial statements and the notes to those
financial statements, before making an investment decision. As used in this
prospectus, unless the context otherwise requires, references to "Travelers,"
"we," "us," and "our" refer to Travelers Property Casualty Corp. (formerly known
as The Travelers Insurance Group Inc.), a Connecticut corporation, and its
consolidated operations, and any reference to "TIGHI" refers to our wholly-owned
subsidiary, Travelers Insurance Group Holdings Inc. (formerly known as Travelers
Property Casualty Corp.), a Delaware corporation, and its consolidated
operations. However, except where indicated, these references and the other
information in this prospectus do not include those operations that will be
transferred by us prior to the completion of this offering as part of our
corporate reorganization described below. Unless the context otherwise requires,
references to "Citigroup" refer to Citigroup Inc. and its subsidiaries other
than Travelers. References to "common stock" refer collectively to our class A
common stock and our class B common stock. We are a holding company and have no
direct operations. Our principal asset is the capital stock of TIGHI and its
insurance subsidiaries. This prospectus contains terms that are specific to the
insurance industry and may be technical in nature. We have included a glossary
of these terms, commencing on page G-1.

                                  OUR COMPANY

     We are a leading property and casualty insurance company in the United
States. We provide a wide range of commercial and personal property and casualty
insurance products and services to businesses, government units, associations
and individuals. We conduct our operations through our wholly-owned subsidiaries
in two business segments: Commercial Lines, which provides a variety of
commercial coverages to a broad spectrum of business clients, and Personal
Lines, which primarily offers automobile and homeowners insurance to
individuals. Commercial coverages and personal coverages accounted for 58% and
42%, respectively, of our combined net written premiums for the year ended
December 31, 2001. After giving pro forma effect to this offering and the
concurrent offering of our convertible notes, and the use of the proceeds from
the offerings, our corporate reorganization and related transactions, at
December 31, 2001, we had total assets and shareholders' equity of $57.6 billion
and $9.8 billion, respectively.

     We are an indirect wholly-owned subsidiary of Citigroup. Citigroup is a
diversified holding company whose businesses provide a broad range of financial
services to consumer and corporate customers around the world.

COMMERCIAL LINES

     We are the third largest writer of commercial lines insurance in the United
States based on 2000 direct written premiums as compiled and published by A.M.
Best. Our Commercial Lines segment offers a broad array of property and casualty
insurance and insurance-related services to our clients. Commercial Lines is
organized into the following five marketing and underwriting groups, each of
which focuses on a particular client base or product grouping to provide
products and services that specifically address clients' needs:

     - National Accounts provides large corporations with casualty products and
       services and includes our residual market business which offers workers'
       compensation products and services to the involuntary market;

     - Commercial Accounts provides property and casualty products to mid-sized
       businesses, property products to large businesses and boiler and
       machinery products to businesses of all sizes, and includes dedicated
       groups focused on the construction industry, trucking industry,
       agribusiness, and ocean and inland marine;

                                        1


     - Select Accounts provides small businesses with property and casualty
       products, including packaged property and liability policies;

     - Bond provides a wide range of customers with specialty products built
       around our market leading surety bond business along with an expanding
       executive liability practice; and

     - Gulf serves all sizes of customers through specialty programs, with
       particular emphasis on management and professional liability products.

     The commercial coverages which we market include workers' compensation,
general liability, including product liability, multiple peril, commercial
automobile, property including fire and allied lines, and a variety of other
coverages. We also underwrite specialty coverages, including general liability
for selected product liability risks, umbrella and excess liability coverage,
directors' and officers' liability insurance, errors and omissions insurance,
fidelity and surety bonds, excess SIPC protection, fiduciary liability insurance
and other professional liability insurance. In addition, we offer various risk
management services, generally including claims management, loss control and
engineering services, to businesses that choose to self-insure some exposures,
to states and insurance carriers that participate in state involuntary workers'
compensation pools and to employers seeking to manage workers' compensation
medical and disability costs.

     We distribute our commercial products through approximately 6,300
independent agencies and brokers located throughout the United States, supported
by a network of approximately 80 field offices and two customer service centers.
We have made significant investments in enhanced technology utilizing
Internet-based applications that make doing business with us easier and more
efficient for our independent agencies and brokers. For the year ended December
31, 2001, Commercial Lines generated net written premiums of approximately $5.7
billion.

PERSONAL LINES

     We are the second largest writer of personal lines insurance through
independent agents and the eighth largest writer of personal lines insurance
overall in the United States, based on 2000 direct written premiums as compiled
and published by A.M. Best. We write most types of property and casualty
insurance covering personal risks. Personal Lines had approximately 5.4 million
policies in force at December 31, 2001. The primary coverages in Personal Lines
are personal automobile and homeowners insurance sold to individuals.

     Personal Lines products are distributed primarily through approximately
7,600 independent agencies located throughout the United States, supported by
personnel in 12 marketing regions and six customer service centers. We have made
significant investments in enhanced technology utilizing Internet-based
applications that make doing business with us easier and more efficient for our
independent agents. We also market through additional distribution channels,
including sponsoring organizations such as employers' and consumer associations,
and joint marketing arrangements with other insurers. For the year ended
December 31, 2001, Personal Lines generated net written premiums of
approximately $4.1 billion.

                           OUR COMPETITIVE ADVANTAGES

     We believe that we are uniquely positioned within the property and casualty
insurance industry to benefit from an improving underwriting environment. Our
competitive advantages are based on:

     - superior financial strength as a result of strong capitalization levels
       and consistent operating returns;

     - a recognized brand name with leading market positions, broad scale and
       product breadth in many commercial and personal product lines and
       geographies;

     - an experienced management team with a broad complement of skills;

     - a consistent record of strong operating returns which are driven by a
       performance-based management and underwriting culture;

     - proprietary management information systems that support detailed
       attention to risk management and returns analysis in order to maximize
       underwriting results;

                                        2


     - demonstrated long-term commitment to the independent agency and broker
       distribution system with a consistent underwriting philosophy;

     - industry-leading technology which enables us to cost effectively provide
       differentiated service to agents and customers; and

     - proven acquisition and integration expertise which will allow us to
       participate in consolidation within the property and casualty industry.

                                  OUR STRATEGY

     Management has established the following key strategic objectives for us:

FOCUS ON CORE PRODUCT LINES USING A DISCIPLINED AND PERFORMANCE-BASED
UNDERWRITING APPROACH

     We will continue to focus on our core property and casualty insurance
product lines and markets for which we have developed selective and consistent
underwriting policies that have been demonstrated to be effective over time. We
emphasize a profit-oriented approach to underwriting rather than focusing on
premium volume or market share.

MAINTAIN FINANCIAL STRENGTH

     We believe that we are well capitalized and that our financial strength
creates a competitive advantage in retaining and attracting business. We plan to
maintain our sound financial position through selective underwriting practices
and a high quality investment portfolio.

ENHANCE OUR POSITION AS A COST-EFFECTIVE PROVIDER OF PROPERTY AND CASUALTY
INSURANCE

     We believe that a critical competitive advantage in the property and
casualty insurance industry is our success in controlling expense ratios. Our
low expense ratios combined with superior risk selection and excellent execution
allow for both competitive pricing and appropriate underwriting returns.

EMPHASIZE CUSTOMER-ORIENTED FOCUS

     We continue to provide new products and services within our core product
lines and markets to foster simpler, closer relationships with customers,
including agents, brokers and insureds. We also enhance customer relations by
providing timely, responsive pricing quotes and claims service.

MANAGE DISTRIBUTION RELATIONSHIPS AND CAPITALIZE ON OUR BRAND NAME AND BROAD
PRODUCT OFFERINGS

     We maintain strong relationships with our distribution force. As a result
of our recognized franchise and our broad array of insurance products and
services and specialized expertise, we are able to offer our agents and brokers
significant product expansion opportunities.

LEVERAGE TECHNOLOGY TO IMPROVE SERVICE AND ENHANCE OUR AGENCY DISTRIBUTION
CHANNELS

     We have been a leading developer of technology-based solutions for the
insurance industry, which enable our independent agents to quote and issue
policies directly from their agencies. The technologies we have developed
provide an ease-of-doing-business environment with our distribution force, which
we believe is a significant competitive advantage.

ACTIVELY PARTICIPATE IN INDUSTRY CONSOLIDATION

     We have successfully acquired and integrated companies as a means to grow
our company. Our market presence and strong balance sheet and cash flow,
together with management's demonstrated experience, create an effective platform
for our participation in industry consolidation.

UTILIZE SOPHISTICATED MODELING AND RAPID RESPONSE SYSTEMS TO MANAGE CATASTROPHIC
EXPOSURE

     We control exposure in high-risk areas through a variety of underwriting
approaches, including the employment of sophisticated computer modeling
techniques to analyze significant natural catastrophe exposures and establish
geographic limits on policy writing designed to maximize returns on catastrophe
exposed business. We have also developed a state-of-the-art rapid response
catastrophe claims unit.
                                        3


   EMPLOY DEDICATED SPECIALISTS AND AGGRESSIVE RESOLUTION STRATEGIES TO MANAGE
   ENVIRONMENTAL AND
     ASBESTOS LOSS EXPOSURE

     Our environmental and asbestos claims are managed by a dedicated group of
professionals which has operated as a separate unit since 1986. We believe that
this approach gives us consistency in claims handling and policy coverage
interpretation and facilitates our early identification of exposures and
aggressive resolution of coverage uncertainties.

                                COMPANY HISTORY

     Our predecessor companies have been in the insurance business for more than
130 years. We are a Connecticut corporation that was formed in 1979. Recently we
changed our name from The Travelers Insurance Group Inc. to Travelers Property
Casualty Corp. In December 1993, Citigroup acquired us. In January 1996, we
formed TIGHI to hold our property and casualty insurance subsidiaries. In April
1996, TIGHI purchased from Aetna Services, Inc. all of the outstanding capital
stock of Aetna's significant property and casualty insurance subsidiaries for
approximately $4.2 billion in cash. In April 1996, TIGHI also completed an
initial public offering of its common stock.

     During April 2000, we completed a cash tender offer and merger, as a result
of which TIGHI became our wholly-owned subsidiary. In the tender offer and
merger, we acquired all of TIGHI's outstanding shares of common stock not owned
by us, representing approximately 14.8% of its outstanding common stock, for
approximately $2.4 billion in cash financed by a loan from Citigroup. The
"Company History" section later in this prospectus includes a discussion and
analysis of the costs and benefits to Citigroup and us in connection with the
tender offer and merger.

                               DIVIDENDS PAYABLE

     In February 2002, our board of directors declared a dividend of $1.0
billion to Citigroup in the form of a non-interest bearing note payable on
December 31, 2002. We expect to repay this note from future earnings, to the
extent available. We refer to this note in this prospectus as the "2002 note."

     In February 2002, our board of directors also declared a dividend of $3.7
billion to Citigroup in the form of a $3.7 billion note payable in two
installments. The first installment of $150 million will be payable in May 2004
and the second installment of $3.55 billion will be payable in February 2017.
This note begins to bear interest after May 9, 2002 at a rate of 7.25% per
annum. This note may be prepaid at any time in whole or in part without penalty
or premium. We expect that substantially all of this note will be prepaid with
the proceeds of the offerings. We refer to this note in this prospectus as the
"special note."

                          OUR CORPORATE REORGANIZATION

     Prior to the completion of this offering, we will effect a corporate
reorganization, under which:

     - we will transfer substantially all of our assets to Citigroup, other than
       the capital stock of TIGHI;

     - Citigroup will assume all of our third-party liabilities, other than
       liabilities relating to TIGHI and TIGHI's active employees;

     - we will effect a recapitalization whereby the then outstanding shares of
       our common stock, all of which are owned by Citigroup, will be exchanged
       for at least 269,000,000 shares of class A common stock and 500,000,000
       shares of class B common stock. The number of shares of class A common
       stock to be owned by Citigroup may be increased by up to an additional
       21,000,000 shares (for a total of 290,000,000 shares of class A common
       stock), to the extent that the underwriters do not exercise their option
       to purchase class A common stock to cover over-allotments; and

     - we will amend and restate our certificate of incorporation and bylaws.

     In this prospectus, we refer to these transactions as our "corporate
reorganization." In addition, we sold the stock of CitiInsurance International
Holdings Inc. on February 28, 2002 to Citigroup for $403 million, its net book
value. We have applied $138 million of the proceeds from this sale to repay

                                        4


intercompany indebtedness to Citigroup. As a result of the corporate
reorganization and the sale of CitiInsurance, TIGHI and its insurance
subsidiaries will be our principal asset.

                           THE TAX-FREE DISTRIBUTION

     We are currently an indirect wholly-owned subsidiary of Citigroup. After
the completion of this offering, Citigroup will beneficially own all of our
outstanding class B common stock and 290 million shares of our class A common
stock, representing 94.8% of the combined voting power of all classes of our
voting securities and 79% of the equity interest in us, assuming the
over-allotment option is not exercised.

     Citigroup has informed us that by year-end 2002 it plans to make a tax-free
distribution to its stockholders of a portion of its ownership interest in us,
which, together with the shares being issued in this offering, will represent
approximately 90.1% of our common equity (more than 90% of the combined voting
power of our then outstanding voting securities). In this prospectus, we refer
to this proposed transaction as the "distribution." Following the distribution,
Citigroup would remain a holder of approximately 9.9% of our common equity (less
than 10% of the combined voting power of our outstanding voting securities). The
distribution and Citigroup's continued ownership of shares thereafter are
subject to Citigroup's receipt of a private letter ruling from the Internal
Revenue Service that the distribution will be tax-free to Citigroup, its
stockholders and us, as well as various other conditions. These other conditions
may include receipt of any necessary third-party consents and regulatory
approvals, the existence of satisfactory market conditions and the satisfaction
of any conditions which may be imposed by the Internal Revenue Service. It is
expected that the ruling will require Citigroup to divest the remaining shares
it holds within five years following the distribution and to vote the shares it
continues to hold following the distribution pro rata with the shares held by
the public. We cannot assure you that the conditions to the distribution will be
satisfied or that Citigroup will consummate the distribution. In any event,
Citigroup has no obligation to consummate the distribution by the end of 2002 or
at all, whether or not these conditions are satisfied.

  BENEFITS OF THE DISTRIBUTION

     We will be focused on the property and casualty insurance
industry.  Separation of our company from Citigroup will allow our management
and board of directors to focus on the property and casualty industry. Strategic
decisions about our business opportunities would not need to be coordinated with
the strategies and opportunities of Citigroup.

     Management incentives can be directly aligned with shareholder
interests.  Management incentives can be designed with a significant equity
component. As a stand-alone property and casualty company, compensation of
management can be directly aligned with the performance of our common stock. We
believe strongly in the performance leverage of this concept.

     We will have greater capital management flexibility.  Separation of our
company from Citigroup would also benefit us by enhancing our capital planning
flexibility. We would no longer have to compete with other Citigroup operations
for funding from Citigroup.

     We believe that the property and casualty industry is fragmented and that
there will be a significant number of consolidation opportunities. As a separate
company, we would be able to invest retained earnings in growing our business
and in acquisitions, or alternatively, in achieving earnings per share growth
through share repurchases.

     Our regulatory environment will be simplified.  As a subsidiary of
Citigroup, we comply with all insurance company regulatory requirements, as well
as Bank Holding Company Act regulations. Once separate from Citigroup, we will
no longer be subject to Bank Holding Company Act regulations. This will simplify
our regulatory compliance and put us in a regulatory position consistent with
our competition.

     We will benefit from the elimination of real and perceived distribution
conflicts.  We distribute the vast majority of our products through independent
agencies and brokers. Agencies and brokers can choose
                                        5


from a number of insurance companies. We believe that they will be attracted to
a company clearly dedicated to the property and casualty business and committed
to the independent agency system.
                               ------------------

     Our principal executive offices are located at One Tower Square, Hartford,
Connecticut 06183, and our telephone number is (860) 277-0111.
                               ------------------

                                  THE OFFERING

Class A common stock:
  U.S. offering...............   168,000,000 shares
  International offering......    42,000,000 shares
     Total....................   210,000,000 shares

Common stock to be outstanding
after this offering...........   500,000,000 shares of class A common stock
                                 500,000,000 shares of class B common stock

Common stock to be held by
Citigroup following this
  offering....................   290,000,000 shares of class A common stock
                                 500,000,000 shares of class B common stock

Use of proceeds...............   We will use the net proceeds to prepay
                                 intercompany indebtedness to Citigroup.

Dividend policy...............   We intend to pay quarterly cash dividends on
                                 all classes of our common stock at an initial
                                 rate of $0.06 per share of common stock,
                                 commencing in the first quarter of 2003,
                                 subject to financial results and declaration by
                                 our board of directors. See "Dividend Policy"
                                 for a discussion of the factors that will
                                 affect the determination by our board of
                                 directors to declare dividends, as well as
                                 other matters concerning our dividend policy.

Voting rights
  Class A common stock........   One vote per share
  Class B common stock........   Seven votes per share

New York Stock Exchange
symbol........................   We have applied to list our class A common
                                 stock on the New York Stock Exchange under the
                                 symbol "TAP.A."

                              CONCURRENT OFFERING

     We are also offering, in a concurrent offering, $850 million aggregate
principal amount of our      % convertible junior subordinated notes due 2032,
plus up to an additional $42.5 million aggregate principal amount of notes if
the over-allotment option for that offering is exercised in full. For additional
information regarding our notes, see the section of this prospectus entitled
"Description of the Notes."

                                        6


     Unless otherwise indicated, all information in this prospectus:

     - assumes the consummation of our corporate reorganization, including the
       recapitalization, whereby the then outstanding shares of our common
       stock, all of which are owned by Citigroup, will be exchanged for at
       least 269,000,000 shares of class A common stock and 500,000,000 shares
       of class B common stock. The number of shares of class A common stock to
       be owned by Citigroup may be increased by up to an additional 21,000,000
       shares (for a total of 290,000,000 shares of class A common stock), to
       the extent that the underwriters do not exercise their option to purchase
       class A common stock to cover over-allotments;

     - assumes the over-allotment option has not been exercised;

     - excludes approximately 16.9 million shares of class A common stock,
       assuming an initial public offering price at the mid-point of the
       offering range for the class A common stock, issuable upon the exercise
       of stock options to be issued on the date of this offering, none of which
       are currently exercisable, at an exercise price equal to the initial
       public offering price;

     - excludes an indeterminate number of shares of our restricted common stock
       which we may use to replace Citigroup restricted stock held by our
       employees and an indeterminate number of shares of common stock issuable
       upon the exercise of options which will be granted in exchange for
       Citigroup options we may assume, if and when the distribution occurs. If
       the distribution were to occur today, the aggregate number of restricted
       shares we would issue and shares subject to options we would grant in
       connection with the replacement and exchange of Citigroup awards would be
       approximately 4.6 million shares of our common stock and 86.2 million
       shares of our common stock, respectively; and

     - excludes a maximum of        shares of our class A common stock that may
       be initially issuable in the future upon conversion of the notes being
       offered in the concurrent offering of notes, or a maximum of      shares
       if the over-allotment option for that offering is exercised in full.

                                        7


                             SUMMARY FINANCIAL DATA

     The summary financial data for each of the fiscal years in the three-year
period ended December 31, 2001 have been derived from our audited financial
statements. See "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Our financial
statements retroactively reflect our corporate reorganization for all periods
presented. All financial data and ratios presented in this prospectus have been
prepared using U.S. generally accepted accounting principles, unless otherwise
indicated.



                                                               YEAR ENDED DECEMBER 31,
                                                              --------------------------
                                                               2001      2000      1999
                                                              ------    ------    ------
                                                               (IN MILLIONS, EXCEPT PER
                                                                     SHARE DATA)
                                                                         
INCOME STATEMENT DATA:
Revenues:
  Premiums..................................................  $9,411    $8,462    $8,009
  Net investment income.....................................   2,034     2,162     2,093
  Fee income................................................     347       312       275
  Realized investment gains.................................     323        47       112
  Other revenues............................................     116        88        84
                                                              ------    ------    ------
     Total revenues.........................................  12,231    11,071    10,573
                                                              ------    ------    ------
Claims and expenses:
  Claims and claim adjustment expenses......................   7,765     6,473     6,059
  Amortization of deferred acquisition costs................   1,539     1,298     1,260
  Interest expense..........................................     205       296       238
  General and administrative expenses.......................   1,333     1,140     1,177
                                                              ------    ------    ------
     Total claims and expenses..............................  10,842     9,207     8,734
                                                              ------    ------    ------
Income before federal income taxes, minority interest and
  cumulative
  effect of changes in accounting principles................   1,389     1,864     1,839
Federal income taxes........................................     327       492       479
                                                              ------    ------    ------
Income before minority interest and cumulative effect of
  changes in accounting principles..........................   1,062     1,372     1,360
Minority interest, net of tax...............................      --        60       224
                                                              ------    ------    ------
Income before cumulative effect of changes in accounting
  principles................................................   1,062     1,312     1,136
Cumulative effect of changes in accounting principles(a)....       3        --      (112)
                                                              ------    ------    ------
Net income..................................................  $1,065    $1,312    $1,024
                                                              ======    ======    ======
Pro forma earnings per share(b).............................  $ 1.06       N/A       N/A
                                                              ======    ======    ======
Dividends per common share(c)...............................  $ 0.53        --        --
                                                              ======    ======    ======


                                        8




                                                               YEAR ENDED DECEMBER 31,
                                                              --------------------------
                                                               2001      2000      1999
                                                              ------    ------    ------
                                                                (DOLLARS IN MILLIONS)
                                                                         
OTHER DATA:
Statutory data(d):
  Ratio of net premiums written to surplus..................    1.36x     1.28x     1.07x
  Policyholders' surplus (at period end)....................  $7,687    $6,904    $7,656
  Loss and loss adjustment expense (LAE) ratio(e)...........    80.7%     75.1%     74.3%
  Underwriting expense ratio(e).............................    27.3      27.0      28.8
  Combined ratio before policyholder dividends(e)...........   108.0     102.1     103.1
  Combined ratio(e).........................................   108.3     102.5     103.7
Statutory industry data:
  Combined ratio for property and casualty insurers.........   114.4(f)  110.4     107.9




                                                               AS OF DECEMBER 31, 2001
                                                              -------------------------
                                                                               AS
                                                              ACTUAL      ADJUSTED(G)
                                                              -------    --------------
                                                                    (IN MILLIONS)
                                                                   
BALANCE SHEET DATA:
Total investments...........................................  $32,619       $32,884
Total assets................................................   57,778        57,640
Claims and claim adjustment expense reserves................   30,737        30,737
Total debt..................................................    2,077         2,855
Total liabilities...........................................   46,192        46,972
TIGHI-obligated mandatorily redeemable securities of
  subsidiary trusts
  holding solely junior subordinated debt securities of
  TIGHI.....................................................      900           900
Shareholders' equity........................................   10,686         9,768
Shareholders' equity excluding accumulated other changes
  in equity from nonowner sources...........................   10,444         9,526


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

(a) Cumulative effect of changes in accounting principles, net of tax (1) for
    the year ended December 31, 2001 includes a gain of $4 million as a result
    of a change in accounting for derivative instruments and hedging activities
    and a loss of $1 million as a result of a change in accounting for
    securitized financial assets; and (2) for the year ended December 31, 1999
    includes a loss of $135 million as a result of a change in accounting for
    insurance-related assessments and a gain of $23 million as a result of a
    change in accounting for insurance and reinsurance contracts that do not
    transfer insurance risk.


(b) The unaudited pro forma earnings per share amounts reflect the
    recapitalization we will effect as part of our corporate reorganization. Pro
    forma earnings per share does not include the effects of our Capital
    Accumulation Program and Stock Option Plan described in the section of this
    prospectus entitled "Arrangements Between Our Company and
    Citigroup -- Intercompany Transactions During the Past Three Years" as these
    plans utilize Citigroup common stock. Conversion of the Citigroup common
    stock in these plans to our common stock is contingent upon the distribution
    occurring. Pro forma earnings per share also does not reflect conversion of
    our convertible junior subordinated notes.


(c) Dividends per common share amounts reflect the recapitalization we will
    effect as part of our corporate reorganization.

(d) Our statutory data have been derived from the financial statements of our
    insurance subsidiaries prepared in accordance with statutory accounting
    practices and filed with insurance regulatory authorities.

(e) The loss and LAE ratio represents the ratio of incurred losses and loss
    adjustment expenses to net premiums earned. The underwriting expense ratio
    represents the ratio of underwriting expenses incurred to net premiums

                                        9


    written. The combined ratio represents the sum of the loss and LAE ratio and
    the underwriting expense ratio and, where applicable, the ratio of dividends
    to policyholders to net earned premiums.

(f) Information provided is for the nine months ended September 30, 2001 for the
    companies included in the A.M. Best Industry Composite.

(g) The as adjusted amounts give effect to the following transactions as if they
    had occurred on December 31, 2001: (1) our receipt of assumed net proceeds
    of $4.3 billion from the offerings and the use of these proceeds to prepay
    indebtedness to Citigroup, (2) the sale of CitiInsurance International
    Holdings Inc. to Citigroup on February 28, 2002 for $403 million and our
    application of $138 million of the proceeds to repay indebtedness to
    Citigroup, (3) the issuance of the special note to Citigroup in a principal
    amount of $3.7 billion in February 2002 and (4) the issuance of the $1.0
    billion 2002 note to Citigroup in February 2002.

    If the offering is priced at or above the mid-point of the offering price
    range for the class A common stock, $150 million of intercompany
    indebtedness will remain outstanding (in addition to the $500 million
    outstanding under a line of credit from Citigroup and the $1.0 billion
    outstanding on the 2002 note). In all other cases, $400 million of
    intercompany indebtedness will remain outstanding (in addition to the $500
    million under the line of credit and the $1.0 billion outstanding on the
    2002 note.)

                                        10


                                  RISK FACTORS

     Before investing in our class A common stock, you should carefully consider
the following risk factors. These risks could materially affect our business,
profitability or financial condition and cause the trading price of our class A
common stock to decline.

                         RISKS RELATING TO OUR BUSINESS

CATASTROPHE LOSSES COULD MATERIALLY REDUCE OUR PROFITABILITY

     Our property and casualty insurance operations expose us to claims arising
out of catastrophes. We have experienced, and will in the future experience,
catastrophe losses which may materially reduce our profitability or harm our
financial condition. Catastrophes can be caused by various natural events,
including hurricanes, windstorms, earthquakes, hail, severe winter weather and
fires. During the past five years catastrophe losses, net of reinsurance and
taxes, ranged from a high of $106 million to a low of $15 million, excluding the
impact of the terrorist attack on September 11th. Catastrophe losses can vary
widely and significantly exceed our recent historic results. Catastrophes can
also be man-made, such as the terrorist attack of September 11th. During 2001,
we recorded a charge of $490 million representing the estimated loss for both
reported and unreported claims incurred and related claim adjustment expenses,
net of reinsurance recoverables and taxes, related to the terrorist attack on
September 11th. The incidence and severity of catastrophes are inherently
unpredictable. It is possible that both the frequency and severity of man-made
catastrophic events will increase.

     The extent of losses from a catastrophe is a function of both the total
amount of insured exposure in the area affected by the event and the severity of
the event. Most catastrophes are restricted to small geographic areas; however,
hurricanes and earthquakes may produce significant damage in larger areas,
especially those that are heavily populated. Although catastrophes can cause
losses in a variety of our property and casualty lines, most of our
catastrophe-related claims in the past have related to homeowners and commercial
property coverages. The geographic distribution of our business subjects us to
catastrophe exposure from hurricanes in the Northeast, Florida, Gulf Coast and
Mid Atlantic regions as well as catastrophe exposure from earthquakes in
California, the New Madrid and Pacific Northwest regions.

     Claims resulting from natural or man-made catastrophic events could cause
substantial volatility in our financial results for any fiscal quarter or year
and could materially reduce our profitability or harm our financial condition.
Our ability to write new business could also be affected. We believe that
increases in the value and geographic concentration of insured property and the
effects of inflation could increase the severity of claims from catastrophic
events in the future. In addition, states have from time to time passed
legislation that has the effect of limiting the ability of insurers to manage
catastrophe risk, such as legislation prohibiting insurers from withdrawing from
catastrophe-prone areas.

OUR BUSINESS COULD BE HARMED BECAUSE OUR POTENTIAL EXPOSURE FOR ASBESTOS CLAIMS
AND RELATED LITIGATION IS VERY DIFFICULT TO PREDICT

     We have established loss reserves for asbestos claims. There is a high
degree of uncertainty with respect to future exposure from asbestos claims
because of significant issues surrounding the liabilities of the insurers; risks
inherent in major litigation, including more aggressive asbestos-related
litigation against insurers, including us; and diverging legal interpretations
and judgments in different jurisdictions. These uncertainties include, among
other things:

     - the extent of coverage under insurance policies;

     - whether or not particular claims are subject to an aggregate limit;

                                        11


     - the number of occurrences involved in particular claims; and

     - new theories of insured and insurer liability.

     In addition, insurers generally, including us, are experiencing an increase
in the number of asbestos-related claims due to, among other things, more
intensive advertising by lawyers seeking asbestos claimants, the increasing
focus by plaintiffs on new and previously peripheral defendants and an increase
in the number of entities seeking bankruptcy protection as a result of
asbestos-related liabilities. In addition to contributing to the increase in
claims, the bankruptcy proceedings may have the effect of significantly
accelerating and increasing loss payments by insurers, including us.

     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. We expect this trend to continue. Although it is
difficult to predict whether these policyholders will be successful on both
issues, to the extent both issues are resolved in their favor, our coverage
obligations under the policies at issue would be materially increased and
bounded only by the applicable per occurrence limits and the number of asbestos
bodily injury claims against the policyholders. Accordingly, it is difficult to
predict the ultimate size of the claims for coverage not subject to aggregate
limits.

     In addition, proceedings have recently been launched directly against
insurers, including us, challenging insurers' conduct in respect of asbestos
claims, including in some cases with respect to previous settlements. Some
plaintiffs are also seeking to join us as defendants in asbestos personal injury
cases that are close to trial. We anticipate the filing of other direct actions
against insurers, including us, 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.

     Particularly during the last few months of 2001 and continuing into 2002,
the asbestos-related trends described above have both accelerated and become
more visible.

     Given the factors described above, it is not presently possible to quantify
the ultimate exposure or range of exposure represented by asbestos claims and
related litigation. We have established reserves that represent our best
estimate of ultimate claims and claim adjustment expenses at December 31, 2001
based upon known facts and current law. However, these claims and related
litigation, particularly if current trends continue to accelerate, could result
in liability exceeding these reserves by an amount that could be material to our
operating results and financial condition in future periods. Because the level
of uncertainty continues to increase and in order to strengthen our ability and
flexibility to advance our strategic goals following the public offering,
Citigroup has offered to enter into an agreement under which it will provide us
with significant financial support for asbestos claims and related litigation,
up to $800 million, reduced by the tax effect of the highest applicable federal
income tax rate, which we believe will substantially enhance our ability to
manage possible adverse developments in the future. This agreement with
Citigroup is described in more detail in the "Arrangements Between Our Company
and Citigroup" section of this prospectus.

OUR BUSINESS COULD BE HARMED BECAUSE OUR POTENTIAL EXPOSURE FOR ENVIRONMENTAL
CLAIMS IS VERY DIFFICULT TO PREDICT

     There is also a high degree of uncertainty with respect to future exposure
from environmental claims for reasons similar to those described above for
asbestos claims.

     As a result of various state and federal regulatory efforts aimed at
environmental remediation, particularly Superfund, the insurance industry
continues to be involved in litigation involving policy coverage and liability
issues. In addition to regulatory pressures, the results of court decisions
affecting the industry's coverage positions continue to be inconsistent and have
expanded coverage beyond its original intent. Accordingly, the ultimate
responsibility and liability for environmental remediation costs remain
uncertain.

                                        12


     Given the factors described above, it is not presently possible to quantify
the ultimate exposure or range of exposure represented by environmental claims.
We have established reserves that represent our best estimate of ultimate claims
and claim adjustment expenses at December 31, 2001 based upon known facts and
current law. However, these claims could result in liability exceeding these
reserves by an amount that could be material to our operating results in future
periods.

WE MAY INCUR ADDITIONAL INCOME STATEMENT CHARGES IF OUR PROPERTY AND CASUALTY
LOSS RESERVES ARE INSUFFICIENT

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

     The inherent uncertainties of estimating insurance reserves are generally
greater for casualty coverages, particularly reserves for environmental and
asbestos losses, than for property coverages. This is due primarily to the
longer period of time that typically elapses before a definitive determination
of ultimate loss can be made, changing theories of legal liability involving
some types of claims and changing political climates.

REINSURANCE MAY NOT BE ADEQUATE TO PROTECT US AGAINST LOSSES

     We use reinsurance to help manage our exposure to property and casualty
risks. The availability and cost of reinsurance are subject to prevailing market
conditions, both in terms of price and available capacity, which can affect our
business volume and profitability. Although the reinsurer is liable to us to the
extent of the ceded reinsurance, we remain liable as the direct insurer on all
risks reinsured. As a result, ceded reinsurance arrangements do not eliminate
our obligation to pay claims. We are subject to credit risk with respect to our
ability to recover amounts due from reinsurers. Reinsurance may not be adequate
to protect us against losses and may not be available to us in the future at
commercially reasonable rates.

     Lloyd's of London, one of our largest reinsurers, restructured its
operations in 1996 with respect to claims for years prior to 1993 and reinsured
these into Equitas Limited. Approximately $248 million was recoverable by us
from Equitas as of December 31, 2001. The outcomes of the restructuring of
Lloyd's are uncertain, and the impact, if any, on collectibility of amounts
recoverable by us from Equitas cannot be quantified at this time. An unfavorable
resolution of these matters could reduce our future profitability.

THE EFFECTS OF EMERGING CLAIM AND COVERAGE ISSUES ON OUR BUSINESS ARE UNCERTAIN

     As industry practices and legal, judicial, social, and other environmental
conditions change, unexpected and unintended issues related to claim and
coverage may emerge. These issues can have a

                                        13


negative effect on our business by either extending coverage beyond our
underwriting intent or by increasing the number or size of claims. Recent
examples of emerging claims and coverage issues include:

     - increases in the number and size of water damage claims related to
       expenses for testing and remediation of mold conditions;

     - increases in the number and size of claims relating to construction
       defects, which often present complex coverage and damage valuation
       questions;

     - changes in interpretation of the named insured provision with respect to
       the uninsured/underinsured motorist coverage in commercial automobile
       policies; and

     - a growing trend of plaintiffs targeting property and casualty insurers,
       including us, in purported class action litigation relating to
       claim-handling and other practices, particularly with respect to the
       handling of personal lines automobile and homeowners claims.

The effects of these and other unforeseen emerging claim and coverage issues are
extremely hard to predict and could harm our business.

OUR BUSINESSES ARE HEAVILY REGULATED AND CHANGES IN REGULATION MAY REDUCE OUR
PROFITABILITY AND LIMIT OUR GROWTH

     We are subject to extensive regulation and supervision in the jurisdictions
in which we conduct business. This regulation is generally designed to protect
the interests of policyholders, as opposed to shareholders and other investors,
and relates to authorization for lines of business, capital and surplus
requirements, investment limitations, underwriting limitations, transactions
with affiliates, dividend limitations, changes in control, premium rates and a
variety of other financial and nonfinancial components of an insurance company's
business.

     In recent years, the state insurance regulatory framework has come under
increased federal scrutiny, and some state legislatures have considered or
enacted laws that may alter or increase state authority to regulate insurance
companies and insurance holding companies. Further, the National Association of
Insurance Commissioners, or NAIC, and state insurance regulators are reexamining
existing laws and regulations, specifically focusing on modifications to holding
company regulations, interpretations of existing laws and the development of new
laws. In addition, Congress and some federal agencies from time to time
investigate the current condition of insurance regulation in the United States
to determine whether to impose federal regulation or to allow an optional
federal incorporation, similar to banks. We cannot predict with certainty the
effect any proposed or future legislation or NAIC initiatives may have on the
conduct of our business. In addition, the insurance laws or regulations adopted
or amended from time to time may be more restrictive or may result in higher
costs than current requirements.

     Although the United States federal government does not directly regulate
the insurance business, changes in federal legislation and administrative
policies in several areas, including changes in the Gramm-Leach-Bliley Act,
financial services regulation and federal taxation, can significantly harm the
insurance industry and us.

ASSESSMENTS AND OTHER SURCHARGES FOR GUARANTY FUNDS AND SECOND-INJURY FUNDS AND
OTHER MANDATORY POOLING ARRANGEMENTS MAY REDUCE OUR PROFITABILITY

     Virtually all states require insurers licensed to do business in their
state to bear a portion of the loss suffered by some insureds as the result of
impaired or insolvent insurance companies. These obligations are funded by
assessments that are expected to increase in the future as a result of recent
insolvencies. Many states also have laws that established second-injury funds to
provide compensation to injured employees for aggravation of a prior condition
or injury which are funded by either assessments based on paid losses or premium
surcharge mechanisms. In addition, as a condition to the ability to conduct
business in various states, our insurance subsidiaries are required to
participate in mandatory property and casualty shared market mechanisms or
pooling arrangements, which provide various types of insurance coverage to

                                        14


individuals or other entities that otherwise are unable to purchase that
coverage from private insurers. The effect of these assessments and mandatory
shared-market mechanisms or changes in them could reduce our profitability in
any given period or limit our ability to grow our business.

OUR INDEMNITY OBLIGATIONS TO CITIGROUP MAY EFFECTIVELY PRECLUDE TRANSACTIONS
WHICH WOULD BE BENEFICIAL TO OUR SHAREHOLDERS

     Citigroup could be required to recognize a gain on the distribution if we
issue a significant amount of our stock in capital raising transactions or in
acquisitions within two years after the date of the distribution, if such
transactions or acquisitions, together with the distribution, are treated as
part of a plan. We have agreed to indemnify Citigroup for any taxes arising out
of the failure of the distribution to qualify as tax-free as a result of our
action or inaction. This indemnity may preclude us from pursuing transactions
that might otherwise be beneficial to our shareholders.

A DOWNGRADE IN THE CLAIMS-PAYING AND FINANCIAL STRENGTH RATINGS OF THE TRAVELERS
PROPERTY CASUALTY POOL COULD SIGNIFICANTLY REDUCE THE NUMBER OF INSURANCE
POLICIES WE WRITE

     Claims-paying and financial strength ratings have become an increasingly
important factor in establishing the competitive position of insurance
companies. At December 31, 2001, The Travelers Property Casualty Pool, which
represented 79% of net written premiums in 2001, was rated A++ (1(st) of 16) by
A.M. Best and AA- (4(th) of 21) by Standard & Poor's. Our claims-paying and
financial strength ratings have not changed since November 2000 when the A.M.
Best rating was upgraded from A+ to A++. Rating agencies review their ratings
periodically, and our current ratings may not be maintained in the future. A
significant downgrade in these ratings could lead to a significant reduction in
the number of insurance policies we write. The ratings are not in any way a
measure of protection offered to investors in our common stock and should not be
relied upon with respect to making an investment in our common stock.

LOSS OR SIGNIFICANT RESTRICTION OF THE USE OF CREDIT SCORING IN THE PRICING AND
UNDERWRITING OF PERSONAL LINES PRODUCTS COULD REDUCE OUR FUTURE PROFITABILITY

     Personal Lines uses credit scoring as a factor in making risk selection and
pricing decisions where allowed by state law. Recently, some consumer groups and
regulators have questioned whether the use of credit scoring unfairly
discriminates against people with low incomes, minority groups and the elderly
and are calling for the prohibition or restriction on the use of credit scoring
in underwriting and pricing. Laws or regulations enacted in a large number of
states that significantly curtail the use of credit scoring in the underwriting
process could reduce our future profitability.

OUR INVESTMENT PORTFOLIO MAY SUFFER REDUCED RETURNS OR LOSSES WHICH COULD REDUCE
OUR PROFITABILITY

     Investment returns are an important part of our overall profitability, and
fluctuations in the fixed income or equity markets could impair our
profitability, financial condition or cash flows. For the year ended December
31, 2001, net investment income and net realized capital gains accounted for
approximately 19% of our consolidated revenues.

     Fluctuations in interest rates affect our returns on, and the market value
of, fixed income and short-term investments, which comprised approximately 88%
of the market value of our investment portfolio as of December 31, 2001. For
2001 and 2000 the change in net unrealized gains in our investment portfolio
reflected a decrease of $232 million and an increase of $936 million,
respectively, primarily due to the impact on our fixed maturity portfolio from
market interest rate movements. In addition, defaults by third parties,
primarily from investments in liquid corporate and municipal bonds, who fail to
pay or perform on their obligations could reduce our investment income and
realized investment gains or result in investment losses.

     We invest a portion of our assets in equity investments, primarily through
private equity and arbitrage partnerships, which are subject to greater
volatility than our fixed income investments. Partnership
                                        15


investments generally provide higher expected return, but present greater risk
and are more illiquid than our fixed income investments. The yield on our
investment portfolio was impacted by the capital markets environment as
reflected in a decrease in our overall average yield on our investment portfolio
from 7.5% in 2000 to 6.8% in 2001. General economic conditions, stock market
conditions and many other factors beyond our control can adversely affect the
value of our equity investments and our ability to control the timing of the
realization of investment income.

THE INABILITY OF OUR SUBSIDIARIES TO PAY DIVIDENDS TO US IN SUFFICIENT AMOUNTS
WOULD HARM OUR ABILITY TO MEET OUR OBLIGATIONS AND PAY FUTURE DIVIDENDS

     We are a holding company, and we have no operations. Our principal asset is
the capital stock of TIGHI and its insurance subsidiaries. We rely primarily on
dividends from our subsidiaries to meet our obligations for payment of interest
and principal on outstanding debt obligations, dividends to shareholders and
corporate expenses. The ability of our insurance subsidiaries to pay dividends
to us in the future will depend on their statutory surplus, on earnings and on
regulatory restrictions. Our principal insurance subsidiaries are domiciled in
the State of Connecticut. Connecticut law governing the payment of dividends by
domestic insurance companies provides that an insurer domiciled in Connecticut
must obtain the prior approval of the state insurance commissioner for the
declaration or payment of any dividend that together with other distributions
made within the preceding twelve months exceeds the greater of 10% of the
insurer's surplus as of the preceding December 31, or the insurer's net income
for the twelve-month period ending the preceding December 31, in each case
determined in accordance with statutory accounting practices.

     This declaration or payment is further limited by adjusted unassigned
surplus, as determined in accordance with Connecticut insurance laws. The
insurance holding company laws of other states in which our subsidiaries are
domiciled generally contain similar, although in some instances somewhat more
restrictive, limitations on the payment of dividends. The inability of our
insurance subsidiaries to pay dividends to us in an amount sufficient to meet
debt service and preferred stock dividend obligations, if any, and other cash
requirements, could harm us. During 2002, a significant portion of dividends
from our insurance subsidiaries is likely to be subject to approval from the
Connecticut Insurance Department, depending upon the amount and timing of the
payments.

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

INTENSE COMPETITION FOR OUR PRODUCTS COULD HARM OUR ABILITY TO MAINTAIN OR
INCREASE OUR PROFITABILITY AND PREMIUM VOLUME

     The property and casualty insurance business is highly competitive, and we
believe that it will remain highly competitive in the foreseeable future. Our
primary commercial lines competitors, based upon direct written premiums as
reported by A.M. Best, as of December 31, 2000, are American International Group
Inc., Zurich/Farmers Group, CNA Financial Corp., Liberty Mutual Insurance
Companies and St. Paul Companies, Inc., which compete with us across a broad
array of product lines. Personal Lines insurance is written by hundreds of
companies of varying sizes. The five largest personal lines companies, based on
automobile and homeowners direct written premiums as reported by A.M. Best, as
of December 31, 2000, are State Farm Group, Allstate Corp., Zurich/Farmers
Group, Nationwide Group and Progressive Corp. These companies sell through
various distribution channels, including independent agents, captive agents and
directly to the consumer. We compete with domestic and foreign insurers, some of
which have greater financial resources than we do. In addition, several property
and casualty insurers writing commercial lines of business now offer products
for alternative forms of risk protection, including large deductible programs
and various forms of self-insurance that utilize captive insurance companies and
risk retention groups. Continued growth in alternative forms of risk protection
could reduce our premium volume. Following the terrorist attack on September
11th, a number of new insurers and reinsurers have been formed to compete in our
industry, and a number of existing market participants have raised new capital
which may enhance
                                        16


their ability to compete. We are also aware that other financial institutions
are now able to offer services similar to our own as a result of the
Gramm-Leach-Bliley Act, which was adopted in November 1999.

CYCLICALITY OF THE PROPERTY CASUALTY INSURANCE INDUSTRY MAY CAUSE FLUCTUATIONS
IN OUR RESULTS

     The property casualty insurance business, especially commercial lines
businesses, have been historically characterized by periods of intense price
competition which could have an adverse effect on our results. Our Commercial
Lines business strategy is to price business to acceptable profit levels and to
decline business where pricing does not afford acceptable returns. We have
reduced business during periods of severe competition and price declines and
grown when pricing allows an acceptable return.

     The personal lines industry is characterized by an automobile underwriting
cycle of loss cost trends. Environmental factors which effect loss cost trends
include inflation in the cost of automobile repairs, medical care and litigation
of liability claims. Other factors, such as improved automobile safety features,
legislation changes, and general economic conditions also have an impact on
changes in loss costs. The personal lines homeowners loss costs move with
inflation in the cost of building materials and labor costs and with demand
caused by weather related catastrophes. Personal lines insurers, including us,
are generally unable to increase premium rates until some time after the costs
associated with the coverage have increased, primarily as a result of state
insurance regulation laws. Therefore, in a period of increasing loss costs,
profit margins decline.

     As a result, the property casualty insurance business historically has been
characterized by periods of intense price competition due to excess underwriting
capacity as well as periods when shortages of underwriting capacity have
permitted attractive premium levels. We expect to continue to experience the
effects of this cyclicality which, during down periods, could harm our financial
condition, profitability or cash flows.

               RISKS RELATING TO OUR RELATIONSHIP WITH CITIGROUP

CONTROL OF OUR COMPANY BY CITIGROUP PRIOR TO THE DISTRIBUTION AND HOLDING OF
CITIGROUP'S STOCK BY SOME OF OUR DIRECTORS AND OFFICERS MAY RESULT IN CONFLICTS
OF INTEREST

     After the completion of this offering, Citigroup will beneficially own all
of our outstanding class B common stock and 290 million shares of our class A
common stock, representing 94.8% of the combined voting power of all classes of
our voting securities and 79% of the equity interest in us, assuming the over-
allotment option is not exercised.

     As long as Citigroup owns shares of our common stock representing more than
50% of the voting power of our outstanding voting securities, Citigroup will
generally be able to determine the outcome of all corporate actions requiring
shareholder approval, including the election of directors. As a result,
Citigroup will be in a position to continue to control most of our significant
corporate actions.

     Under the provisions of our certificate of incorporation, the prior consent
of Citigroup is effectively required in connection with various corporate
actions by us until such time as Citigroup ceases beneficially to own at least
20% of the combined voting power of all our outstanding voting securities.

     Because Citigroup's interests may differ from ours, actions Citigroup takes
with respect to us, as our controlling shareholder, may not be favorable to us.
As a result, conflicts of interest may arise between us and Citigroup in a
number of areas relating to our past and ongoing relationships.

     In addition, some of our directors and a number of our executive officers
own substantial amounts of Citigroup stock and options to purchase Citigroup
stock. Their ownership of Citigroup stock could create, or appear to create,
potential conflicts of interest when directors and officers are faced with
decisions that could have different implications for us and Citigroup.

                                        17


CITIGROUP AND ITS DIRECTORS AND OFFICERS WILL HAVE LIMITED LIABILITY FOR BREACH
OF FIDUCIARY DUTY

     Our certificate of incorporation provides that, subject to any contractual
provision to the contrary, Citigroup will have no obligation to refrain from:

     - engaging in the same or similar business activities or lines of business
       as we do; or

     - doing business with any of our clients or customers.

     Under our certificate of incorporation, neither Citigroup nor any officer
or director of Citigroup, except as provided in our certificate of
incorporation, will be liable to us or to our shareholders for breach of any
fiduciary duty by reason of any of these activities.

TRANSITIONAL ARRANGEMENTS WITH CITIGROUP ARE NOT THE RESULT OF ARM'S-LENGTH
NEGOTIATIONS AND MAY NOT BE SUSTAINED AT THE SAME LEVEL AS WHEN WE WERE
CONTROLLED BY CITIGROUP

     We currently have, and after this offering will continue to have,
contractual arrangements which require Citigroup and its affiliates to provide
transitional services and shared arrangements to us. If the distribution occurs,
we cannot assure you that these services and shared arrangements will be
sustained at the same level as when we were controlled by Citigroup or that we
will obtain the same benefits. After the expiration of these contracts, we may
not be able to replace these services and arrangements in a timely manner or on
terms and conditions, including cost, as favorable as those we have received
from Citigroup.

     These agreements were made in the context of a parent-subsidiary
relationship and were negotiated in the overall context of the planned
distribution. After the distribution, we may have to pay higher prices for
similar services from unaffiliated third parties.

IF CITIGROUP ENGAGES IN THE SAME TYPE OF BUSINESS WE CONDUCT, OUR ABILITY TO
SUCCESSFULLY OPERATE AND EXPAND OUR BUSINESS MAY BE HAMPERED

     Because Citigroup may engage in the same activities in which we engage,
there is a risk that we may be in direct competition with Citigroup over
insurance underwriting activities. To address these potential conflicts, we have
adopted a corporate opportunity policy which has been incorporated into our
certificate of incorporation. This policy provides that if any of our officers
or directors are also officers or directors of Citigroup and any such individual
acquires knowledge of a potential transaction or matter that may be a corporate
opportunity for both us and Citigroup, the opportunity will belong to Citigroup,
unless the opportunity is expressly offered to our director or officer in
writing solely in his or her capacity as a director or officer of our company.
Mr. Lipp, our chairman and chief executive officer, will continue to be a member
of Citigroup's board of directors until April 16, 2002.

     Due to the tremendous resources of Citigroup, including financial resources
and name recognition, Citigroup could have a significant competitive advantage
over us should it decide to engage in the type of business we conduct, which may
cause our business to be severely affected.

              RISKS RELATING TO THIS OFFERING AND THE DISTRIBUTION

WE MAY NOT REALIZE THE EXPECTED BENEFITS FROM THE DISTRIBUTION

     Citigroup has informed us that by year-end 2002 it plans to make a tax-free
distribution to its stockholders of a portion of its ownership interest in us,
which, together with the shares being issued in this offering, will represent
approximately 90.1% of our common equity (more than 90% of the combined voting
power of our then outstanding voting securities). Following the distribution,
Citigroup will remain a holder of approximately 9.9% of our common equity (less
than 10% of the combined voting power of our voting securities). The
distribution is subject to Citigroup's receipt of a private letter ruling from
the Internal Revenue Service that it will be tax-free to Citigroup, its
stockholders and us, as well as various other conditions. We cannot assure you
that these conditions will be satisfied or that Citigroup will consummate the
distribution. In any event, Citigroup has no obligation to consummate the
distribution by
                                        18


the end of 2002 or at all, whether or not these conditions are satisfied. If the
distribution does not occur at all we will not realize the benefits of the
distribution described elsewhere in this prospectus. Even if the distribution is
completed, we may not obtain these benefits.

     In addition, the distribution will entail significant costs, which may be
greater than those we have planned for, that we will incur regardless of whether
we are able to realize any benefits of the distribution. Moreover, we will bear
the negative effects of the distribution, including loss of access to the
financial, managerial and professional resources from which we have benefited in
the past, regardless of whether we ever realize any benefits from the
distribution.

OUR STOCK PRICE MAY BE VOLATILE

     The initial public offering price of our class A common stock will be
determined by negotiations between us and the representatives of the
underwriters and may not be indicative of the market price of the class A common
stock after this offering or the price at which class A common stock may be sold
in the public market after the offering. Factors such as quarterly variations in
our financial results, announcements by us or others, developments affecting us
and general market volatility could cause the market price of the class A common
stock to fluctuate significantly.

THERE MAY BE FUTURE SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK,
INCLUDING SHARES OF COMMON STOCK AS A RESULT OF THE PLANNED DISTRIBUTION BY
CITIGROUP, WHICH MAY DEPRESS THE PRICE OF OUR SHARES

     Any sales of a substantial number of our shares in the public market, or
the perception that such sales might occur, may cause the market price of our
shares to decline. Upon completion of this offering, all        shares we are
offering will be freely tradable without restriction, unless the shares are
owned by one of our affiliates. In addition, Citigroup has informed us that by
year-end 2002 it plans to make a tax-free distribution to its stockholders of a
portion of its ownership interest in us, which, together with the shares being
issued in this offering, will represent approximately 90.1% of our common equity
(more than 90% of the combined voting power of our then outstanding voting
securities). Substantially all of these shares of common stock would be eligible
for immediate resale in the public market. We are unable to predict whether
significant numbers of shares will be sold in the open market in anticipation of
or following the distribution. We have also granted Citigroup demand
registration rights with respect to shares of our common stock it will hold upon
completion of this offering. Citigroup may exercise its demand registration
rights and any shares so registered will be freely tradable in the public market
unless owned by one of our affiliates. In addition, an indeterminate number of
shares may be issued in connection with our replacement of Citigroup restricted
stock awards or shares issuable upon the exercise of options which will be
granted in exchange for Citigroup options we may assume, if and when the
distribution occurs. If the distribution were to occur today, the aggregate
number of restricted shares we would issue and shares subject to options we
would grant in connection with the replacement and exchange of Citigroup awards
would be approximately 4.6 million shares of our common stock and 86.2 million
shares of our common stock, respectively.

BECAUSE OF DIFFERENCES IN VOTING POWER BETWEEN THE CLASS A COMMON STOCK AND THE
CLASS B COMMON STOCK, THE MARKET PRICE OF THE CLASS A COMMON STOCK MAY BE LESS
THAN THE MARKET PRICE OF THE CLASS B COMMON STOCK FOLLOWING THE DISTRIBUTION

     After the distribution, the class B common stock will be publicly traded.
Shares of class B common stock have seven votes per share while shares of class
A common stock have one vote per share. Because the class B common stock has
greater voting power per share than the class A common stock, some investors may
prefer the class B common stock as a means of investing in us. The differences
in voting power between the class B common stock and the class A common stock
may cause the class B common stock to trade at a higher market price than the
class A common stock.

                                        19


YOU MAY BE PREVENTED FROM RECOGNIZING A CHANGE OF CONTROL PREMIUM ON THE SALE OF
CLASS A COMMON STOCK

     Citigroup currently owns all of our outstanding common stock. After
completion of this offering and prior to the distribution, Citigroup will
beneficially own all of our outstanding class B common stock and 290 million
shares of our class A common stock, together representing 94.8% of the combined
voting power of all classes of our voting securities. For as long as Citigroup
owns a majority of our voting securities, a takeover of our company will require
Citigroup's approval. Because the class B common stock has greater aggregate
voting power than the class A common stock, the accumulation of a significant
block of class B common stock following the planned distribution could result in
a change of control without the affirmative vote of holders of class A common
stock.

     In addition, provisions of our certificate of incorporation, bylaws, our
shareholder rights plan and provisions of applicable Connecticut law may
discourage, delay or prevent a merger or other change of control that a
shareholder may consider favorable.

                                        20


           CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus may include
forward-looking statements which reflect our current views with respect to
future events and financial performance. These statements include
forward-looking statements both with respect to us in general and the insurance
and reinsurance sectors specifically, both as to underwriting and investment
matters. Statements which include the words "expect," "intend," "plan,"
"believe," "project," "anticipate," "will," and similar statements of a future
or forward-looking nature identify forward-looking statements for purposes of
the federal securities laws or otherwise.

     All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that could
cause actual results to differ materially from those indicated in these
statements. We believe that these factors include, but are not limited to those
described under "Risk Factors" above. We undertake no obligation to publicly
update or review any forward-looking statement, whether as a result of new
information, future developments or otherwise.

                                COMPANY HISTORY

     Our predecessor companies have been in the insurance business for more than
130 years. We are a Connecticut corporation that was formed in 1979. Recently we
changed our name from The Travelers Insurance Group Inc. to Travelers Property
Casualty Corp. In December 1993, Citigroup acquired us. In January 1996, we
formed TIGHI to hold our property and casualty insurance subsidiaries. In April
1996, TIGHI purchased from Aetna Services, Inc., formerly Aetna Life and
Casualty Company, all of the outstanding capital stock of Aetna's significant
property and casualty insurance subsidiaries, which we refer to in this
prospectus as Aetna P&C, for approximately $4.2 billion in cash. In April 1996,
TIGHI also completed an initial public offering of its common stock.

     During April 2000, we completed a cash tender offer and merger, as a result
of which TIGHI became our wholly-owned subsidiary. In the tender offer and
merger, we acquired all of TIGHI's outstanding shares of common stock that were
not already owned by us, representing approximately 14.8% of TIGHI's outstanding
common stock, for approximately $2.4 billion in cash financed by a loan from
Citigroup. Citigroup loaned us the funds to consummate the tender offer and the
merger and to pay related fees and expenses. Citigroup obtained the funds from
existing working capital sources. In connection with the tender offer, the
independent directors of our board were advised by Morgan Stanley. Citigroup was
advised by Salomon Smith Barney. Total fees paid for investment banking and
legal expenses totalled $22.3 million.

     Total interest expense incurred by us on the loan from Citigroup to finance
the tender offer was $79 million and $113 million for the years ended December
31, 2001 and 2000, respectively.

     Total cash dividends paid or expected to be paid to Citigroup by us
subsequent to the tender offer and prior to the distribution are estimated to be
$3.7 billion and $526 million in 2002 and 2001, respectively. Additionally, a
$1.0 billion dividend was declared during February 2002 in the form of a
non-interest bearing note payable to Citigroup on December 31, 2002. There were
no dividend payments to Citigroup subsequent to the tender offer for the year
ended December 31, 2000.

     Based on the $2.4 billion purchase price paid by Citigroup to acquire the
minority shares of TIGHI, the implied value for us in April 2000 was $16.2
billion. At the mid-point of the offering price range for the class A common
stock, the implied value for us is $17.5 billion, representing an 8% increase in
the value of our company, excluding dividends paid or expected to be paid by us.

                                        21


                                USE OF PROCEEDS

     We estimate that the net proceeds from this offering will be approximately
$3.5 billion based on an assumed initial public offering price of $17.50 per
share, after deducting underwriting discounts and commissions and the estimated
expenses of this offering payable by us. If the over-allotment option is
exercised in full, we estimate that the net proceeds will be approximately $3.9
billion.

     We estimate that the net proceeds from the concurrent offering of our
convertible notes will be approximately $825 million, or $866 million if the
over-allotment option for that offering is exercised in full.

     We will use all of the net proceeds from the offerings to prepay
intercompany indebtedness to Citigroup, including substantially all of the $3.7
billion special note payable in two installments, on May 9, 2004 and on February
7, 2017, issued to Citigroup on February 7, 2002, which begins to bear interest
after May 9, 2002 at a rate of 7.25% per annum. If the offering is priced at or
above the mid-point of the offering price range for the class A common stock,
$150 million of intercompany indebtedness will remain outstanding following the
offerings (in addition to the $500 million outstanding under a line of credit
from Citigroup and the $1.0 billion outstanding on the 2002 note). In all other
cases, $400 million of intercompany indebtedness will remain outstanding (in
addition to the $500 million under the line of credit and the $1.0 billion
outstanding on the 2002 note).

                                DIVIDEND POLICY

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

     Under our certificate of incorporation, for so long as Citigroup controls
at least a majority of the voting power of the outstanding class B common stock,
the prior consent of Citigroup would effectively be required before we can
declare or pay any dividends in excess of our regular quarterly dividends as
contemplated above. In addition, our subsidiaries are, and we and our
subsidiaries may in the future become, subject to debt instruments or other
agreements that further limit our ability to pay dividends.

     We have the option to defer interest payments on the notes. If we elect to
defer interest payments, we will not be permitted, with limited exceptions, to
pay dividends on our common stock during a deferral period.

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

     During the year ended December 31, 2001, we paid $526 million of dividends
to Citigroup. In February 2002, our board of directors declared two dividends in
the aggregate amount of $4.7 billion, payable to Citigroup.

     We are a holding company and have no direct operations. Our ability to pay
dividends in the future will depend on us receiving dividends from our insurance
subsidiaries. Our insurance subsidiaries are subject to the laws of the states
in which they are domiciled and are consequently limited in the amount of
dividends that they can pay.

                                        22


                                    DILUTION

     Our pro forma net tangible book value at December 31, 2001 after giving
effect to our corporate reorganization but without giving effect to this
offering was approximately $7.6 billion, or $9.90 per share, assuming
769,000,000 shares of common stock issued and outstanding. Net tangible book
value per share represents the amount of our tangible assets, meaning:

     - total assets less intangible assets;

     - reduced by our total liabilities, including the mandatorily redeemable
       securities of subsidiary trusts for which we are obligated; and

     - divided by the number of shares of common stock outstanding.

     Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of our common stock in this
offering and the net tangible book value per share immediately following this
offering.

     After giving effect to the offerings, and after deducting the underwriting
discounts and commissions and estimated offering expenses and giving effect to
the intended use of proceeds, assuming that we use all of the net proceeds to
prepay intercompany indebtedness and the issuance of the $1.0 billion note to
Citigroup in February 2002, our adjusted pro forma net tangible book value as of
December 31, 2001 would have been approximately $6.7 billion, or $6.70 per
share. This represents an immediate decrease in net tangible book value of $3.20
per share equivalent to our existing shareholder. This also represents an
immediate dilution of $10.80 per share to new investors purchasing shares in the
class A common stock offering. The following table illustrates this dilution per
share:


                                                                 
Assumed initial public offering price per share.............           $17.50
  Pro forma net tangible book value per share before this
     offering...............................................  $ 9.90
  Decrease per share attributable to investors in this
     offering...............................................  $(3.20)
Pro forma adjusted net tangible book value as adjusted to
  give effect to this offering..............................           $ 6.70
                                                                       ------
Dilution per share to new investors.........................           $10.80
                                                                       ======


     To the extent that any shares of restricted common stock are issued or
options to purchase our common stock are granted and exercised, there will be
further dilution to investors.

                                        23


                                 CAPITALIZATION

     Set forth below is our capitalization as of December 31, 2001:

     - on an actual basis, and

     - on an as adjusted basis to give effect to the following events, as if
       each such event had occurred on December 31, 2001:

           - our receipt of assumed net proceeds of $4.3 billion from the
             offerings and the use of the proceeds to prepay indebtedness to
             Citigroup;

           - the sale of CitiInsurance International Holdings Inc. to Citigroup
             on February 28, 2002 for $403 million and our application of $138
             million of the proceeds to repay indebtedness to Citigroup;

           - the issuance of the special note to Citigroup in a principal amount
             of $3.7 billion in February 2002; and

           - the issuance of the 2002 note to Citigroup in a principal amount of
            $1.0 billion in February 2002.

     The information presented below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the related notes
included elsewhere in this prospectus.



                                                               AS OF DECEMBER 31, 2001
                                                              -------------------------
                                                              ACTUAL     AS ADJUSTED(A)
                                                              -------    --------------
                                                                    (IN MILLIONS)
                                                                   
DEBT:
  Notes payable to affiliates(a):
    Line of credit..........................................  $   500       $   500
    Note payable due 2005(b)................................    1,197            --
    Note payable(c).........................................       --           150
    Note payable(d).........................................       --         1,000
    Convertible junior subordinated notes due 2032..........       --           825
  Other long-term debt......................................      380           380
                                                              -------       -------
      Total debt............................................    2,077         2,855
                                                              -------       -------
  TIGHI-obligated mandatorily redeemable securities of
    subsidiary trusts holding solely junior subordinated
    debt securities of TIGHI................................      900           900
                                                              -------       -------
SHAREHOLDERS' EQUITY(e):
  Common stock and additional paid-in capital...............    4,440         8,222
  Retained earnings.........................................    6,004         1,304
  Accumulated other changes in equity from nonowner
    sources.................................................      242           242
                                                              -------       -------
      Total shareholders' equity............................   10,686         9,768
                                                              -------       -------
         Total capitalization...............................  $13,663       $13,523
                                                              =======       =======


---------------
(a) If the offering is priced at or above the mid-point of the offering price
    range for the class A common stock, $150 million of intercompany
    indebtedness will remain outstanding following the offerings (in addition to
    the $500 million outstanding under a line of credit from Citigroup and the
    $1.0 billion outstanding on the 2002 note). In all other cases, $400 million
    of intercompany indebtedness will remain outstanding (in addition to the
    $500 million under the line of credit and the $1.0 billion outstanding on
    the 2002 note).

(b) On February 7, 2002, this note was replaced by a note payable on April 30,
    2005.

(c) Consists of the special note issued as a dividend declared by our board of
    directors in February 2002. This note is payable in two installments, $150
    million in May 2004 and $3.55 billion February 2017. It is expected that
    immediately following the offerings and after giving effect to the
    application of the proceeds, that the amount outstanding under this note
    will be $150 million due in May 2004.

(d)Consists of a note issued as a dividend declared by our board of directors in
   February 2002. This note is non-interest bearing and payable on December 31,
   2002.

(e) At December 31, 2001, we had 15,000 shares of common stock authorized, of
    which 1,500 were issued and outstanding. After our corporate reorganization,
    we will have authorized capital consisting of (1) 50 million shares of
    preferred stock, none of which will be issued and outstanding, (2) 1.5
    billion shares of class A common stock, of which 500 million will be issued
    and outstanding after this offering and (3) 1.5 billion shares of class B
    common stock of which 500 million will be issued and outstanding after this
    offering.

                                        24


                   SELECTED HISTORICAL FINANCIAL INFORMATION

     The selected historical financial data for each of the fiscal years in the
five-year period ended December 31, 2001 have been derived from our financial
statements which have been audited by KPMG LLP. These historical results are not
necessarily indicative of results to be expected for any future period and the
year to date results are not necessarily indicative of our full-year
performance. The selected financial data presented below should be read in
conjunction with the audited financial statements and accompanying notes
included in this prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The audited financial statements
for the three years ended December 31, 2001 have been included elsewhere in this
prospectus. Our financial statements retroactively reflect our corporate
reorganization for all periods presented.



                                                                     YEAR ENDED DECEMBER 31,
                                                          ----------------------------------------------
                                                           2001      2000      1999      1998      1997
                                                          -------   -------   -------   -------   ------
                                                               (IN MILLIONS, EXCEPT PER SHARE DATA)
                                                                                   
INCOME STATEMENT DATA:
Revenues:
  Premiums..............................................  $ 9,411   $ 8,462   $ 8,009   $ 7,796   $7,225
  Net investment income.................................    2,034     2,162     2,093     2,102    2,052
  Fee income............................................      347       312       275       306      365
  Realized investment gains.............................      323        47       112       145      182
  Other revenues........................................      116        88        84       105      103
                                                          -------   -------   -------   -------   ------
    Total revenues......................................   12,231    11,071    10,573    10,454    9,927
                                                          -------   -------   -------   -------   ------
Claims and expenses:
  Claims and claim adjustment expenses..................    7,765     6,473     6,059     5,947    5,484
  Amortization of deferred acquisition costs............    1,539     1,298     1,260     1,197    1,127
  Interest expense......................................      205       296       238       185      163
  General and administrative expenses...................    1,333     1,140     1,177     1,311    1,386
                                                          -------   -------   -------   -------   ------
    Total claims and expenses...........................   10,842     9,207     8,734     8,640    8,160
                                                          -------   -------   -------   -------   ------
Income before federal income taxes, minority interest
  and cumulative effect of changes in accounting
  principles............................................    1,389     1,864     1,839     1,814    1,767
Federal income taxes....................................      327       492       479       487      521
                                                          -------   -------   -------   -------   ------
Income before minority interest and cumulative effect of
  changes in accounting principles......................    1,062     1,372     1,360     1,327    1,246
Minority interest, net of tax...........................       --        60       224       223      212
                                                          -------   -------   -------   -------   ------
Income before cumulative effect of changes
  in accounting principles..............................    1,062     1,312     1,136     1,104    1,034
Cumulative effect of changes in accounting principles,
  net of tax and minority interest(a)...................        3        --      (112)       --       --
                                                          -------   -------   -------   -------   ------
Net income..............................................  $ 1,065   $ 1,312   $ 1,024   $ 1,104   $1,034
                                                          =======   =======   =======   =======   ======
Pro forma earnings per share(b).........................  $  1.06       N/A       N/A       N/A      N/A
                                                          =======   =======   =======   =======   ======
Dividends per common share(c)...........................  $  0.53        --        --        --       --
                                                          =======   =======   =======   =======   ======
Ratio of earnings to fixed charges......................     6.58x     6.48x     7.45x     8.75x    9.11x
                                                          =======   =======   =======   =======   ======


                                        25




                                                                       YEAR ENDED DECEMBER 31,
                                                             -------------------------------------------
                                                              2001      2000     1999     1998     1997
                                                             ------    ------   ------   ------   ------
                                                                        (DOLLARS IN MILLIONS)
                                                                                   
OTHER DATA:
Statutory data(d):
  Ratio of net premiums written to surplus.................    1.36x     1.28x    1.07x    1.14x    1.27x
  Policyholders' surplus (at period end)...................  $7,687    $6,904   $7,656   $7,079   $6,188
  Loss and loss adjustment expense (LAE) ratio(e)..........   80.7%     75.1%    74.3%    73.6%    72.4%
  Underwriting expense ratio(d)............................    27.3      27.0     28.8     28.6     29.9
  Combined ratio before policyholder dividends(e)..........   108.0     102.1    103.1    102.2    102.3
  Combined ratio(e)........................................   108.3     102.5    103.7    102.7    103.5
Statutory industry data:
  Combined ratio for property and casualty insurers........   114.4(e)  110.4    107.9    106.0    102.0




                                                                              AS OF
                                                                          DECEMBER 31,
                                                         -----------------------------------------------
                                                          2001      2000      1999      1998      1997
                                                         -------   -------   -------   -------   -------
                                                                          (IN MILLIONS)
                                                                                  
BALANCE SHEET DATA:
Total investments......................................  $32,619   $30,754   $29,843   $31,901   $31,138
Total assets...........................................   57,778    53,850    50,795    51,751    51,230
Claims and claim adjustment expense reserves...........   30,737    28,442    29,003    29,589    30,324
Total debt.............................................    2,077     3,006     2,148     3,192     1,357
Total liabilities(g)...................................   46,192    43,736    43,455    45,080    43,740
TIGHI-obligated mandatorily redeemable securities of
  subsidiary trusts holding solely junior subordinated
  debt securities of TIGHI.............................      900       900       900       900       900
Shareholder's equity...................................   10,686     9,214     6,440     5,771     6,590
Shareholder's equity excluding accumulated other
  changes in equity from nonowner sources..............   10,444     8,813     6,611     5,006     5,991


---------------
(a) Cumulative effect of changes in accounting principles, net of tax (1) for
    the year ended December 31, 2001 includes a gain of $4 million as a result
    of a change in accounting for derivative instruments and hedging activities
    and a loss of $1 million as a result of a change in accounting for
    securitized financial assets; and (2) for the year ended December 31, 1999
    includes a loss of $135 million as a result of a change in accounting for
    insurance-related assessments and a gain of $23 million as a result of a
    change in accounting for insurance and reinsurance contracts that do not
    transfer insurance risk.


(b) The unaudited pro forma earnings per share amounts reflect the
    recapitalization we will effect as part of our corporate reorganization. Pro
    forma earnings per share does not include the effects of the Company's
    Capital Accumulation Program and Stock Option Plan described in the
    disclosure of Intercompany Transactions During the Past Three Years as these
    plans utilize Citigroup common stock. Conversion of the Citigroup common
    stock in these plans to Travelers Property Casualty Corp. common stock is
    contingent upon the distribution occurring. Pro forma earnings per share
    also does not reflect conversion of our convertible junior subordinated
    notes.


(c) Dividends per common share amounts reflect the recapitalization we will
    effect as part of our corporate reorganization.

(d) Our statutory data have been derived from the financial statements of our
    insurance subsidiaries prepared in accordance with statutory accounting
    practices and filed with insurance regulatory authorities.

(e) The loss and LAE ratio represents the ratio of incurred losses and loss
    adjustment expenses to net premiums earned. The underwriting expense ratio
    represents the ratio of underwriting expenses incurred to net premiums
    written. The combined ratio represents the sum of the loss and LAE ratio and
    the underwriting expense ratio and, where applicable, the ratio of dividends
    to policyholders to net earned premiums.

(f) Information provided is for the nine months ended September 30, 2001 for the
    companies included in the A.M. Best Industry Composite.

(g) Other liabilities include a minority interest liability of $1.4 billion,
    $1.5 billion and $1.3 billion at December 31, 1999, 1998 and 1997,
    respectively.

                                        26


                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the consolidated
financial statements of us and our subsidiaries and related notes included
elsewhere in this prospectus. These financial statements retroactively reflect
our corporate reorganization for all periods presented.

OUR CORPORATE REORGANIZATION

     Prior to the completion of this offering, we will effect a corporate
reorganization, under which:

     - we will transfer substantially all of our assets to affiliates of
       Citigroup, other than the capital stock of TIGHI;

     - Citigroup will assume all of our third-party liabilities, other than
       liabilities relating to TIGHI and TIGHI's active employees;

     - we will effect a recapitalization whereby the then outstanding shares of
       our common stock, all of which are owned by Citigroup, will be exchanged
       for at least 269,000,000 shares of class A common stock and 500,000,000
       shares of class B common stock. The number of shares of class A common
       stock to be owned by Citigroup may be increased by up to an additional
       21,000,000 shares (for a total of 290,000,000 shares of class A common
       stock), to the extent that the underwriters do not exercise their option
       to purchase class A common stock to cover over-allotments; and

     - we will amend and restate our certificate of incorporation and bylaws.

     As a result of these transactions, TIGHI and its insurance subsidiaries
will be our principal asset.

OTHER TRANSACTIONS

     On February 28, 2002, we sold the stock of CitiInsurance to Citigroup for
$403 million, its net book value. We have applied $138 million of the proceeds
from this sale to repay intercompany indebtedness to Citigroup. In addition, we
have agreed to purchase from Citigroup the premises located at One Tower Square,
Hartford, Connecticut and other properties for $68 million.

     After the completion of this offering, Citigroup will beneficially own all
of our outstanding class B common stock and 290 million shares of our class A
common stock, representing 94.8% of the combined voting power of all classes of
our voting securities and 79% of the equity interest in us, assuming the over-
allotment option is not exercised. Citigroup is a diversified holding company
whose businesses provide a broad range of financial services to consumer and
corporate customers around the world. The periodic reports of Citigroup provide
additional business and financial information concerning that company and its
consolidated subsidiaries.

     Citigroup has informed us that by year-end 2002 it plans to make a tax-free
distribution to its stockholders of a portion of its ownership interest in us,
which, together with the shares being issued in this offering, will represent
approximately 90.1% of our common equity (more than 90% of the combined voting
power of our then outstanding voting securities). Following the distribution,
Citigroup would remain a holder of approximately 9.9% of our common equity (less
than 10% of the combined voting power of our then outstanding voting
securities). The distribution and Citigroup's continued ownership of shares
thereafter are subject to Citigroup's receipt of a private letter ruling from
the Internal Revenue Service that the distribution will be tax-free to
Citigroup, its stockholders and us, as well as various other conditions. It is
expected that the ruling will require Citigroup to divest the remaining shares
it holds within five years following the distribution and to vote the shares it
continues to hold following the distribution pro rata with the shares held by
the public. We cannot assure you that these conditions will be satisfied or that
Citigroup will consummate the distribution. In any event, Citigroup has no
obligation to consummate the distribution by the end of 2002 or at all, whether
or not these conditions are satisfied. See "Risk Factors -- Risks Relating to
this Offering and the Distribution -- We may not realize the expected benefits
from the distribution."

                                        27



     Prior to the completion of this offering, we will enter into an agreement
with Citigroup that will provide that in the event that in any fiscal year we
record additional asbestos-related income statement charges in excess of $150
million, net of any reinsurance, Citigroup will pay to us the amount of any such
excess up to a cumulative aggregate of $800 million, reduced by the tax effect
of the highest applicable federal income tax rate.


CONSOLIDATED OVERVIEW

     We provide 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.

     During April 2000, we completed a cash tender offer and merger, as a result
of which TIGHI became our wholly-owned subsidiary. In the tender offer and
merger, we acquired all of TIGHI's outstanding shares of common stock that were
not already owned by us, representing approximately 14.8% of TIGHI's outstanding
common stock, for approximately $2.4 billion in cash financed by a loan from
Citigroup.

     On May 31, 2000, we completed our acquisition of the surety business of
Reliance Group Holdings, Inc., or Reliance Surety, for $580 million. In
connection with the acquisition, we entered into a reinsurance arrangement for
pre-existing business, and the resulting net cash outlay for this transaction
was approximately $278 million. This transaction included the acquisition of an
intangible asset of approximately $450 million, which is being amortized over 15
years. Accordingly, the results of operations and the assets and liabilities
acquired from Reliance Surety are included in the financial statements beginning
June 1, 2000. This acquisition was accounted for as a purchase.

     In the third quarter of 2000, we purchased the renewal rights to a portion
of Reliance Surety's commercial lines middle-market book of business, or
Reliance Middle Market. We also acquired the renewal rights to Frontier
Insurance Group, Inc.'s environmental, excess and surplus lines casualty
businesses and some classes of surety business.

     On October 1, 2001, we paid $329 million to Citigroup for The Northland
Company and its subsidiaries and Associates Lloyds Insurance Company. In
addition, on October 3, 2001, the capital stock of CitiCapital Insurance
Company, formerly known as Associates Insurance Company, with a net book value
of $356 million was contributed to us by Citigroup. See notes 1 and 2 to our
consolidated financial statements.

CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 2001,
2000 AND 1999



                                                               2001       2000       1999
                                                              -------    -------    -------
                                                                      (IN MILLIONS)
                                                                           
Revenues....................................................  $12,231    $11,071    $10,573
Income before cumulative effect of changes in accounting
  principles and minority interest..........................  $ 1,062    $ 1,372    $ 1,360
Minority interest, net of tax...............................       --         60        224
Cumulative effect of changes in accounting principles, net
  of tax and minority interest..............................        3         --       (112)
                                                              -------    -------    -------
Net income(a)...............................................  $ 1,065    $ 1,312    $ 1,024
                                                              =======    =======    =======


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

(a) Net income includes $209 million, $31 million and $72 million of realized
    investment gains in 2001, 2000 and 1999, respectively. Included in realized
    investment gains were after-tax impairment charges related to other than
    temporary declines in value of $95 million, $20 million and $28 million for
    the years ended December 31, 2001, 2000 and 1999, respectively.


     Net income was $1.065 billion in 2001, $1.312 billion in 2000 and $1.024
billion in 1999. Net income for 2001 did not include any minority interest, due
to the April 2000 completed cash tender offer and merger, compared to 2000 and
1999 which reflect minority interest of $60 million and $224 million,
respectively. Net income for 2001 included $3 million of restructuring charges
related primarily to the downsizing of direct marketing activities and
associated telemarketing operations in Personal Lines. Also included in 2001 was
a charge of $1 million related to the initial adoption of the FASB Emerging
Issues

                                        28


Task Force EITF 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Interests in Securitized Financial Assets" (EITF 99-20),
and a benefit of $4 million related to the initial adoption of Financial
Accounting Standards Board No. 133, "Accounting for Derivative Instruments and
Hedging Activity" (FAS 133). The net benefit of $3 million due to the adoption
of these accounting changes has been accounted for as a cumulative effect of
changes in accounting principles. Net income in 1999 included a charge of $135
million related to the initial adoption of the Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants' (AcSEC)
Statement of Position 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments" (SOP 97-3), and a benefit of $23 million related
to the initial adoption of AcSEC Statement of Position 98-7, "Deposit
Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not
Transfer Insurance Risk" (SOP 98-7). The net charge of $112 million due to the
initial adoption of these Statements of Position has also been accounted for as
a cumulative effect of changes in accounting principles.

     Operating income, which excludes realized investment gains in all years,
minority interest in 2000 and 1999, restructuring charges and the cumulative
effect of changes in accounting principles in 2001 and 1999 described above, was
$856 million in 2001, $1.341 billion in 2000 and $1.288 billion in 1999. The
decrease in operating earnings in 2001 from 2000 primarily reflects the impact
of catastrophe losses of $490 million associated with the terrorist attack on
September 11th. Operating earnings in 2001 were also reduced by increased loss
cost trends, including increased medical costs, auto repair costs and
reinsurance costs, and lower net investment income, partly offset by the benefit
of rate increases, higher fee income and lower interest expense. The increase in
operating income in 2000 from 1999 was due to Commercial Lines rate increases,
lower catastrophe losses, higher net investment income, the 1999 charge related
to curtailing the sale of TRAVELERS SECURE(R) auto and homeowners products
marketed through the agents of Primerica Financial Services, a unit of
Citigroup, higher fee income and lower operating expenses. These factors were
partially offset by increased loss cost trends, including increased medical
costs and auto repair costs, lower favorable prior-year reserve development and
higher interest expense. Results for 2000 and 1999 also reflected benefits
resulting from legislative actions that changed the manner in which some states
finance their workers' compensation second-injury funds, principally in the
states of New York and Pennsylvania.

     Revenues of $12.231 billion in 2001 increased $1.160 billion from 2000.
Revenues of $11.071 billion in 2000 increased $498 million from 1999. The
increase in revenue in 2001 from 2000 was primarily attributable to higher
earned premiums, higher fee income and higher realized investment gains,
partially offset by a decrease in net investment income. The increase in revenue
in 2000 from 1999 was due to higher earned premiums, higher net investment
income and higher fee income, partially offset by lower realized gains.

     Earned premiums increased $949 million to $9.411 billion in 2001 primarily
due to rate increases, the full year impact of the acquisitions in 2000 of
Reliance Surety and the renewal rights for the Reliance Middle Market and
Frontier businesses, combined with the purchase of Northland and contribution of
CitiCapital in October 2001. Earned premiums increased $453 million to $8.462
billion in 2000 from 1999, primarily due to rate increases and the impact of the
Reliance Surety acquisition and the new business associated with the acquisition
of the renewal rights for the Reliance Middle Market and Frontier businesses.

     Net investment income was $2.034 billion in 2001, a decrease of $128
million from 2000. This decrease largely reflects the increase in dividends and
debt repayments to Citigroup, lower fixed income interest rates and lower
returns from private equity investments. Net investment income was $2.162
billion in 2000, an increase of $69 million from 1999 primarily due to a higher
return on investments.

     Fee income was $347 million in 2001, a $35 million increase from 2000. Fee
income was $312 million in 2000, a $37 million increase from 1999. National
Accounts within Commercial Lines is the primary source of fee income due to its
service fee business. The increase in fee income in 2001 and 2000 was primarily
due to the shift of business mix from premium-based products to fee-based
products and the favorable rate environment and the repopulation of the
involuntary pools.

                                        29


     Claims and expenses were $10.842 billion in 2001 compared to $9.207 billion
in 2000 and $8.734 billion in 1999. The increase in claims and expenses in 2001
was primarily the result of higher catastrophe losses associated with the
terrorist attack on September 11th, increased loss cost trends, and increased
claims and operating expenses related to the growth in premiums, including the
full-year impact of the Reliance Surety acquisition and the acquisition of the
renewal rights for the Reliance Middle Market and Frontier businesses, and the
acquisition of Northland and the contribution of CitiCapital in October 2001,
partially offset by lower interest expense due to lower outstanding debt and
lower interest rates. The increase in claims and expenses in 2000 was primarily
the result of increased loss cost trends, lower favorable prior-year reserve
development, increased claims related to the growth in premiums, including the
impact of the Reliance Surety acquisition and the new business associated with
the acquisition of the renewal rights for the Reliance Middle Market and
Frontier businesses and higher interest expense principally due to increased
debt associated with the stock repurchase in April 2000. These factors were
partially offset by lower catastrophe losses, the 1999 charge related to
curtailing the sale of TRAVELERS SECURE(R) products and a reduction in general
and administrative expenses. Results for 2000 and 1999 also reflected benefits
resulting from legislative actions that changed the manner in which some states
finance their workers' compensation second-injury funds, principally in the
states of New York and Pennsylvania.

     Our effective tax rate was 24%, 26% and 26% in 2001, 2000 and 1999,
respectively. These rates differed from the statutory tax rate in those years
primarily due to non-taxable investment income. The decrease in the 2001
effective tax rate from 2000 was primarily due to relatively higher non-taxable
income reflecting the impact of losses associated with the terrorist attack on
September 11th.

  STATUTORY AND GAAP COMBINED RATIOS

     The statutory and GAAP combined ratios were as follows:



                                                                2001    2000    1999
                                                                -----   -----   -----
                                                                       
STATUTORY:
  Loss and Loss Adjustment Expense (LAE) ratio..............     80.7%   75.1%   74.3%
  Underwriting expense ratio................................     27.3    27.0    28.8
  Combined ratio before policyholder dividends..............    108.0   102.1   103.1
  Combined ratio............................................    108.3   102.5   103.7
GAAP:
  Loss and LAE ratio........................................     80.5%   74.2%   73.0%
  Underwriting expense ratio................................     27.2    25.6    28.3
  Combined ratio before policyholder dividends..............    107.7    99.8   101.3
  Combined ratio............................................    108.0   100.2   101.9


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

     The 2001 statutory and GAAP combined ratios include the impact of the
terrorist attack on September 11th. Excluding the impact of this event, the
statutory and GAAP combined ratios before policyholder dividends for 2001 would
have been 100.0% and 99.7%, respectively. The 2000 statutory and GAAP combined
ratios include an adjustment in Commercial Lines due to a reinsurance
transaction associated with the acquisition of the Reliance Surety business.
Excluding this adjustment, the statutory and GAAP combined ratios before
policyholder dividends for 2000 would have been 101.9% and 100.1%, respectively.
The 1999 statutory combined ratio before policyholder dividends includes the
treatment, on a statutory basis only, of a commutation of an asbestos liability
to an insured. In addition, the 1999 statutory and GAAP combined ratios before
policyholder dividends include an adjustment in Personal Lines associated with
the termination of a quota share reinsurance arrangement. Excluding these items,
the statutory and GAAP combined ratios before policyholder dividends for 1999
would have been 101.8% and 101.5%, respectively.

                                        30


     The decrease in the 2001 statutory and GAAP combined ratios before
policyholder dividends, excluding the impact of the terrorist attack on
September 11th, compared to the 2000 statutory and GAAP combined ratios before
policyholder dividends, excluding the impact of the reinsurance transaction, was
primarily due to premium growth related to rate increases and the impact of the
increase in the Commercial Lines Bond business, primarily associated with the
ongoing business associated with the Reliance Surety acquisition, which
generally has a lower loss and LAE ratio, partially offset by a higher
underwriting expense ratio. Partially offsetting these items was the effect of
increased loss cost trends.

     The 2000 statutory combined ratio before policyholder dividends, excluding
the impact of the reinsurance transaction, was virtually the same as the 1999
statutory combined ratio before policyholder dividends, excluding the
commutation and quota share reinsurance adjustments. The 2000 statutory loss and
loss adjustment expense ratio component increased primarily due to increased
loss cost trends and lower favorable prior-year reserve development, partially
offset by lower catastrophe losses. The 2000 statutory underwriting expense
ratio decreased primarily due to a disproportionately smaller increase in
expenses associated with the growth in premiums.

     The improvement in the 2000 GAAP combined ratio before policyholder
dividends, excluding the impact of the reinsurance transaction, compared to the
1999 GAAP combined ratio before policyholder dividends, excluding the effects of
a quota share termination, was primarily due to a decrease in the underwriting
expense ratio related to a disproportionately smaller increase in expenses
associated with the growth in premiums. This was partially offset by an increase
in the loss and loss adjustment expense ratio primarily due to increased loss
cost trends and lower favorable prior-year reserve development, partially offset
by lower catastrophe losses.

RESULTS OF OPERATIONS BY SEGMENT FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND
1999

  COMMERCIAL LINES



                                                               2001      2000      1999
                                                              ------    ------    ------
                                                                    (IN MILLIONS)
                                                                         
Revenues....................................................  $7,751    $6,835    $6,492
                                                              ------    ------    ------
Income before cumulative effect of changes in accounting
  principles and minority interest..........................  $  957    $1,220    $1,159
Minority interest, net of tax...............................      --        48       184
Cumulative effect of changes in accounting principles, net
  of tax and minority interest..............................       2        --      (112)
                                                              ------    ------    ------
Net income(a)...............................................  $  959    $1,172    $  863
                                                              ======    ======    ======


---------------
(a) Commercial Lines net income includes $208 million, $31 million and $82
    million of realized investment gains in 2001, 2000 and 1999, respectively.

     Net income was $959 million in 2001, $1.172 billion in 2000 and $863
million in 1999. Net income for 2001 did not include any minority interest, due
to the April 2000 completed cash tender offer and merger, compared to 2000 and
1999 which reflect minority interest of $48 million and $184 million,
respectively. Included in net income in 2001 was a charge of $1 million related
to the initial adoption of EITF 99-20. Also included in 2001 was a $3 million
benefit related to the initial adoption of FAS 133. Both of these items have
been accounted for as a cumulative effect of changes in accounting principles.
Net income in 1999 included a charge of $135 million related to the initial
adoption of SOP 97-3 and a benefit of $23 million related to the initial
adoption of SOP 98-7. The net charge of $112 million due to the initial adoption
of these Statements of Position has been accounted for as a cumulative effect of
changes in accounting principles.

     Commercial Lines operating income, which excludes realized investment gains
in all years, minority interest in 2000 and 1999 and the cumulative effect of
changes in accounting principles in 2001 and 1999, was $749 million, $1.189
billion and $1.077 billion in 2001, 2000 and 1999, respectively. The 2001
decrease compared to 2000 primarily reflects the impact of catastrophe losses of
$448 million associated

                                        31


with the terrorist attack on September 11th. The decrease also reflects
increased loss cost trends, including increased medical costs, auto repair costs
and reinsurance costs, and lower net investment income, partially offset by the
benefit of rate increases, higher fee income and higher favorable prior-year
reserve development. The improvement in operating income for 2000 over 1999
reflected rate increases, higher fee income, lower catastrophe losses and higher
net investment income, partially offset by increased loss cost trends and lower
favorable prior-year reserve development. Results for 2000 and 1999 also
reflected benefits resulting from legislative actions that changed the manner in
which some states finance their workers' compensation second-injury funds,
principally in the states of New York and Pennsylvania.

     Revenues of $7.751 billion in 2001 increased $916 million from 2000.
Revenues of $6.835 billion in 2000 increased $343 million from 1999. The
increase in 2001 reflected higher earned premiums, higher fee income and higher
realized investment gains, partially offset by a decrease in net investment
income. The increase in 2000 reflected higher earned premiums, higher fee income
and higher net investment income, partially offset by a decrease in realized
investment gains.

     Earned premiums were $5.431 billion in 2001 compared to $4.747 billion in
2000 and $4.375 billion in 1999. The 2001 increase in earned premiums was
primarily due to rate increases, the full-year impact of the ongoing business
associated with the Reliance Surety acquisition and the renewal rights for the
Reliance Middle Market and Frontier businesses, and the acquisition of Northland
and the contribution of CitiCapital in October 2001. The 2000 increase in earned
premiums was primarily due to rate increases, the Reliance Surety acquisition
and the new business associated with the acquisition of the renewal rights for
the Reliance Middle Market and Frontier businesses.

     Net investment income was $1.615 billion for 2001, a decrease of $98
million from $1.713 billion in 2000. This decrease largely reflects the increase
in dividends and debt repayments to Citigroup, lower fixed income interest rates
and lower returns from private equity investments. Net investment income was
$1.713 billion in 2000, an increase of $24 million from $1.689 billion in 1999.
This increase was primarily due to a higher return on investments.

     Fee income was $347 million in 2001, a $35 million increase from 2000. Fee
income was $312 million in 2000, a $37 million increase from 1999. National
Accounts is the primary source of fee income due to its service fee business.
The increase in fee income in 2001 and 2000 was primarily due to the shift of
business mix from premium-based products to fee-based products, the favorable
rate environment and the repopulation of involuntary pools.

     Net written premiums by market for the three years ended December 31:



                                                            2001      2000      1999
                                                           ------    ------    ------
                                                                 (IN MILLIONS)
                                                                      
National Accounts........................................  $  419    $  352    $  488
Commercial Accounts......................................   2,396     2,099     1,816
Select Accounts..........................................   1,713     1,575     1,494
Bond.....................................................     590       487       207
Gulf.....................................................     608       517       403
                                                           ------    ------    ------
Total net written premiums...............................  $5,726    $5,030    $4,408
                                                           ======    ======    ======


     Commercial Lines net written premiums were $5.726 billion in 2001 compared
to $5.030 billion in 2000 and $4.408 billion in 1999. The 2001 increase
reflected the impact of the improving rate environment as evidenced by the
continued favorable pricing on new and renewal business. The 2001 increase also
includes the full-year impact of the acquisition in 2000 of the renewal rights
for the Reliance Middle Market business combined with net written premiums
related to the acquisition of Northland and the contribution of CitiCapital in
October 2001 in Commercial Accounts, the acquisition in 2000 of the renewal
rights for the Frontier business in Gulf and the impact of the ongoing business
associated with the Reliance Surety acquisition in Bond. Included in Bond net
written premiums in 2000 is an increase of $131 million due to a reinsurance
transaction associated with the acquisition of the Reliance Surety business. The
2000 increase reflected the impact of an improving rate environment as evidenced
by the continued favorable pricing on new and renewal business. Also
contributing to the increase in net written

                                        32


premiums in 2000 was the impact of new business associated with the acquisition
of the renewal rights for the Reliance Middle Market business in Commercial
Accounts, the impact of the Reliance Surety acquisition in Bond and the new
business associated with the acquisition of the renewal rights for the Frontier
business in Gulf.

     National Accounts works with national and regional brokers providing
insurance coverages and services, primarily workers' compensation, mainly to
large corporations. National Accounts also includes the residual market
business, which sells claims and policy management services to workers'
compensation and automobile assigned risk plans and to self-insurance pools
throughout the United States. National Accounts net written premiums were $419
million in 2001 compared to $352 million in 2000. This increase was primarily
due to the purchase of less reinsurance, reflecting the shift in business mix
from guaranteed cost products to loss-sensitive products, combined with the
repopulation of the involuntary pools. National Accounts net written premiums
were $352 million in 2000 compared to $488 million in 1999. This decrease was
primarily due to a decrease in our level of involuntary pool participation, the
result of pricing declines due to the highly competitive marketplace, and our
disciplined approach to underwriting and risk management.

     For 2001, new business in National Accounts was marginally lower than 2000,
reflecting a disciplined approach to market opportunities. The business
retention ratio for 2001 was moderately lower than 2000, reflecting a focus on
account profitability and an increase in lost business due to the renewal price
increases in 2001. New business in National Accounts for 2000 was marginally
lower than 1999, reflecting our disciplined approach to underwriting and risk
management. The business retention ratio for 2000 was moderately lower than
1999, reflecting an increase in lost business due to the renewal price increases
in 2000.

     Commercial Accounts serves primarily mid-sized businesses for casualty
products and both large and mid-sized businesses for property products through a
network of independent agents and brokers. Within Commercial Accounts, a
dedicated construction unit exists as well as a unit which primarily writes
coverages for the trucking industry. Commercial Accounts net written premiums of
$2.396 billion in 2001 were $297 million above 2000 premium levels. This
increase reflected continued favorable pricing on renewal business, favorable
new business in national property, the acquisition of Northland and the
contribution of CitiCapital in October 2001. Commercial Accounts net written
premiums were $2.099 billion in 2000 compared to $1.816 billion in 1999,
reflecting the impact of the new business associated with the Reliance Middle
Market business and the impact of the improving rate environment.

     For 2001, new premium business in Commercial Accounts was moderately lower
than 2000, reflecting the acquisition of the renewal rights for the Reliance
Middle Market business in 2000. The business retention ratio for 2001 was
significantly lower than 2000, reflecting the continued disciplined approach to
achieving acceptable levels of account profitability and an increase in lost
business due to the renewal price increases in 2001. New business in Commercial
Accounts for 2000 was significantly higher than 1999, reflecting the impact of
the acquisition of Reliance Middle Market renewal business. The business
retention ratio for 2000 was moderately lower than 1999, reflecting an increase
in lost business due to the renewal price increases in 2000.

     Select Accounts serves small businesses through a network of independent
agents. Select Accounts net written premiums were $1.713 billion in 2001
compared to $1.575 billion in 2000 and $1.494 billion in 1999. The increase in
Select Accounts net written premiums primarily reflected price increases on
renewal business. This increase was partially offset by our continued
disciplined approach to underwriting and risk management. New premium business
in Select Accounts was marginally lower in 2001 compared to 2000. The business
retention ratio for 2001 was virtually the same as 2000. For 2000, new business
in Select Accounts was moderately higher than 1999, reflecting the unusually low
new business in 1999 resulting from our selective underwriting policy in the
highly competitive marketplace. The business retention ratio for 2000 was
moderately lower than 1999, reflecting an increase in lost business due to the
renewal price increases in 2000.

     Bond provides a variety of fidelity and surety bonds and executive
liability coverages to clients of all sizes through independent agents and
brokers. Bond's net written premiums of $590 million in 2001 were
                                        33


$234 million above 2000, excluding an adjustment of $131 million in 2000 due to
a reinsurance transaction associated with the acquisition of the Reliance Surety
business, primarily due to the full-year impact of the ongoing business
associated with the Reliance Surety acquisition and production growth in Bond's
Executive Liability product line group, specifically its fidelity, directors'
and officers' liability and blended product lines. The blended product lines
combine fidelity insurance, employment practices liability insurance, directors'
and officers' liability insurance, other related professional liability
insurance and fiduciary liability insurance into one product with either
individual or aggregate limits. The growth in these product lines is reflective
of Bond's strategy to further enhance its product and customer diversification
through the faster growing and larger executive liability market. Bond's net
written premiums of $356 million in 2000, excluding an adjustment of $131
million due to a reinsurance transaction associated with the acquisition of the
Reliance Surety business, were $149 million above 1999 due to the impact of the
Reliance Surety acquisition and production growth in Bond's Executive Liability
product line group, specifically its fidelity, directors' and officers'
liability and blended product lines.

     Gulf markets products to national, mid-sized and small customers and
distributes them through both wholesale brokers and retail agents and brokers
throughout the United States. Gulf's net written premiums were $608 million in
2001, compared to $517 million in 2000. This increase primarily reflected the
full-year impact of the renewal rights for the Frontier business and
participation in the London market. Gulf's net written premiums of $517 million
in 2000 were $114 million above 1999 due to the impact of the new business
associated with the acquisition of the renewal rights for the Frontier business
and less use of reinsurance.


     Commercial Lines claims and expenses of $6.494 billion in 2001 increased
$1.323 billion from 2000 and increased $244 million in 2000 compared to 1999.
The 2001 increase was primarily due to higher catastrophe losses primarily
associated with the terrorist attack on September 11th, increased loss cost
trends, including increased medical costs, auto repair costs and reinsurance
costs, higher losses and operating expenses associated with the growth in
premium and claims volume including the full-year impact of the Reliance Surety
acquisition and the acquisition of the renewal rights for the Reliance Middle
Market and Frontier businesses, and the acquisition of Northland and
contribution of CitiCapital in October 2001, partially offset by higher
favorable prior-year reserve development. The 2000 increase was primarily due to
increased loss cost trends, lower favorable prior-year reserve development and
higher losses associated with the growth in premium and claims volume, partially
offset by lower catastrophe losses. Results for 2000 and 1999 reflected benefits
resulting from legislative actions that changed the manner in which some states
finance their workers' compensation second-injury funds, principally in the
states of New York and Pennsylvania.


     Catastrophe losses, net of taxes and reinsurance, were $471 million and $27
million in 2001 and 1999, respectively. There were no catastrophe losses in
2000. Catastrophe losses in 2001 were primarily due to the Seattle earthquake,
Tropical Storm Allison and the terrorist attack on September 11th. The 1999
catastrophe losses were primarily due to Hurricane Floyd and tornadoes in
Oklahoma.

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



                                                              2001     2000     1999
                                                              -----    -----    -----
                                                                       
STATUTORY:
  Loss and LAE ratio........................................   83.4%    76.0%    77.9%
  Underwriting expense ratio................................   28.7     27.8     30.7
  Combined ratio before policyholder dividends..............  112.1    103.8    108.6
  Combined ratio............................................  112.6    104.5    109.7
GAAP:
  Loss and LAE ratio........................................   83.0%    74.7%    75.2%
  Underwriting expense ratio................................   28.2     25.4     29.8
  Combined ratio before policyholder dividends..............  111.2    100.1    105.0
  Combined ratio............................................  111.7    100.8    106.1


     GAAP combined ratios for Commercial Lines differ from statutory combined
ratios primarily due to the deferral and amortization of some expenses for GAAP
reporting purposes only.
                                        34


     The 2001 statutory and GAAP combined ratios include the impact of the
terrorist attack on September 11th. Excluding the impact of this event, the
statutory and GAAP combined ratios before policyholder dividends for 2001 would
have been 99.5% and 98.4%, respectively. The 2000 statutory and GAAP combined
ratios include an adjustment associated with the acquisition of the Reliance
Surety business. Excluding this adjustment, the statutory and GAAP combined
ratios before policyholder dividends for 2000 would have been 103.5% and 100.8%,
respectively. The 1999 statutory combined ratio reflects the treatment, on a
statutory basis only, of the commutation of an asbestos liability to an insured.
Excluding the commutation, the statutory combined ratio before policyholder
dividends for 1999 would have been 106.1%.

     The decrease in the 2001 statutory and GAAP combined ratios before
policyholder dividends, excluding the impact of the terrorist attack on
September 11th, compared to the 2000 statutory and GAAP combined ratios before
policyholder dividends, excluding the impact of the Reliance Surety reinsurance
transaction, was primarily due to premium growth related to rate increases, the
full-year impact of the ongoing business associated with the Reliance Surety
acquisition, the purchase of the renewal rights for the Reliance Middle Market
and Frontier businesses and higher favorable prior-year reserve development,
partially offset by increased loss cost trends and catastrophe losses due to the
Seattle earthquake and Tropical Storm Allison in 2001.

     The improvement in the 2000 statutory and GAAP combined ratios before
policyholder dividends compared to 1999, excluding the related adjustments
above, was primarily due to premium growth related to rate increases as well as
the impact of the Reliance Surety acquisition and the purchase of the renewal
rights for the Reliance Middle Market and Frontier businesses, and lower
catastrophe losses. This was partially offset by increased loss cost trends,
lower favorable prior-year reserve development and a disproportionately smaller
increase in expenses associated with the growth in premiums.

  PERSONAL LINES



                                                               2001      2000      1999
                                                              ------    ------    ------
                                                                    (IN MILLIONS)
                                                                         
Revenues....................................................  $4,454    $4,232    $4,077
Net income before cumulative effect of change in accounting
  principle and minority interest...........................  $  241    $  360    $  358
Minority interest, net of tax...............................      --        17        57
Cumulative effect of change in accounting principle, net of
  tax and minority interest.................................       1        --        --
                                                              ------    ------    ------
Net income(a)...............................................  $  242    $  343    $  301
                                                              ======    ======    ======


---------------
(a) Personal Lines net income includes $3 million of realized investment gains
    in 2001 and $10 million of realized investment losses in 1999.

     Net income in 2001 was $242 million compared to $343 million in 2000 and
$301 million in 1999. Net income for 2001 did not include any minority interest,
due to the April 2000 completed cash tender offer and merger, compared to 2000
and 1999 which reflect minority interest of $17 million and $57 million,
respectively. Net income for 2001 also included $3 million of restructuring
charges related primarily to the downsizing of direct marketing activities and
associated telemarketing operations in Personal Lines and a $1 million benefit
related to the initial adoption of FAS 133, which has been accounted for as a
cumulative effect of a change in accounting principle.

     Personal Lines operating income, which excludes realized investment gains
and losses in all years, minority interest in 2000 and 1999 and the cumulative
effect of a change in accounting principle and the restructuring charges in
2001, was $241 million, $360 million and $368 million in 2001, 2000 and 1999,
respectively. The decrease in operating income in 2001 reflects the impact of
catastrophe losses of $42 million associated with the terrorist attack on
September 11th. The decrease in operating income in 2001 also reflects the
effects of increased loss cost trends, including increased medical costs and
auto repair

                                        35


costs, lower favorable prior-year reserve development and lower net investment
income partially offset by rate increases. The decrease in operating income in
2000 was primarily due to increased loss cost trends and lower favorable
prior-year reserve development, partially offset by the 1999 charge related to
curtailing the sale of TRAVELERS SECURE(R) products, higher net investment
income and lower catastrophe losses.

     Revenues in 2001 were $4.454 billion compared to $4.232 billion in 2000.
The increase was primarily attributable to a $249 million growth in earned
premiums primarily due to rate increases and $6 million of realized investment
gains in 2001, compared to no realized investment gains in 2000. This was
partially offset by a $36 million decrease in net investment income from 2000,
which largely reflects the increase in dividends and debt repayments to
Citigroup and lower fixed income interest rates.

     Revenues in 2000 of $4.232 billion increased $155 million from 1999. The
increase in revenues in 2000 reflected growth in earned premiums in all
distribution channels except TRAVELERS SECURE(R), higher net investment income
and lower realized investment losses. Personal Lines had approximately 5.4
million, 5.4 million and 5.3 million policies in force at December 31, 2001,
2000 and 1999, respectively.

     Net written premiums by product line for the three years ended December 31:



                                                            2001      2000      1999
                                                           ------    ------    ------
                                                                 (IN MILLIONS)
                                                                      
Personal automobile......................................  $2,591    $2,366    $2,369
Homeowners and other.....................................   1,517     1,447     1,436
                                                           ------    ------    ------
Total net written premiums...............................  $4,108    $3,813    $3,805
                                                           ======    ======    ======


     Personal Lines net written premiums in 2001 were $4.108 billion, compared
to $3.813 billion in 2000. The increase in 2001 reflects growth in target
markets served by independent agents and growth in affinity group marketing and
joint marketing arrangements, partially offset by continued emphasis on
disciplined underwriting and risk management. Rate increases implemented in both
the automobile and homeowners product lines were the primary contributors to the
growth in net written premiums. The business retention ratio in 2001 is
comparable to the 2000 ratio.

     Personal Lines net written premiums in 2000 were $3.813 billion, compared
to $3.733 billion in 1999 (excluding an adjustment of $72 million associated
with the termination of a quota share reinsurance arrangement). The increase in
2000 reflects growth in target markets served by independent agents and growth
in affinity group marketing and joint marketing arrangements, partially offset
by planned reductions in the TRAVELERS SECURE(R) auto and homeowners business, a
mandated rate decrease in New Jersey, and continued emphasis on disciplined
underwriting and risk management. The business retention ratio in 2000 was
moderately lower compared to 1999, reflecting planned reductions in the
TRAVELERS SECURE(R) auto and homeowners business.

     Personal Lines claims and expenses were $4.115 billion in 2001 compared to
$3.715 billion in 2000 and $3.561 billion in 1999. The increase in claims and
expenses in 2001 reflects higher catastrophe losses associated with the
terrorist attack on September 11th. The increase also reflects the impact of
increased loss cost trends and lower favorable prior-year reserve development.
The 2000 increase was primarily the result of increased loss cost trends, lower
favorable prior-year reserve development and higher losses associated with the
growth in premiums and related claim volume, partially offset by the 1999 charge
related to curtailing the sale of TRAVELERS SECURE(R) products and lower
catastrophe losses.

     Catastrophe losses, net of taxes and reinsurance, were $86 million, $54
million and $79 million in 2001, 2000 and 1999, respectively. Catastrophe losses
in 2001 were primarily due to Tropical Storm Allison and wind and hailstorms in
the Midwest and Texas in the second quarter and the terrorist attack on
September 11th in the third quarter. Catastrophe losses in 2000 were primarily
due to Texas, Midwest and Northeast wind and hailstorms in the second quarter
and hailstorms in Louisiana and Texas in the first quarter. Catastrophe losses
in 1999 were primarily due to Hurricane Floyd in the third quarter, wind and
hailstorms on the East Coast and tornadoes in the Midwest in the second quarter
and a wind and ice storm in the Midwest and Northeast in the first quarter.

                                        36


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



                                                              2001     2000    1999
                                                              -----    ----    ----
                                                                      
STATUTORY:
  Loss and LAE ratio........................................   77.0%   73.8%   70.0%
  Underwriting expense ratio................................   25.3    25.9    26.7
  Combined ratio............................................  102.3    99.7    96.7

GAAP:
  Loss and LAE ratio........................................   77.0%   73.6%   70.3%
  Underwriting expense ratio................................   25.8    25.7    26.5
  Combined ratio............................................  102.8    99.3    96.8


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

     The 2001 statutory and GAAP combined ratios include the impact of the
terrorist attack on September 11th. Excluding the impact of this event, the
statutory and GAAP combined ratios for 2001 would have been 100.7% and 101.2%,
respectively. The increase in the 2001 statutory and GAAP combined ratios,
excluding the impact of the terrorist attack on September 11th, compared to the
2000 statutory and GAAP combined ratios reflects increased loss cost trends and
lower favorable prior-year reserve development, partially offset by the growth
in premiums due to rate increases.

     The 1999 statutory and GAAP combined ratios for Personal Lines include an
adjustment associated with the termination of a quota share reinsurance
arrangement. Excluding this adjustment, the statutory and GAAP combined ratios
for 1999 would have been 96.5% and 97.3%, respectively. The increase in the 2000
statutory and GAAP combined ratios compared to 1999 statutory and GAAP combined
ratios, excluding the reinsurance adjustment, was primarily due to increased
loss cost trends and lower favorable prior year reserve development, offset in
part by the 1999 TRAVELERS SECURE(R) charge and lower catastrophe losses.

  INTEREST EXPENSE AND OTHER



                                                             2001     2000     1999
                                                             -----    -----    -----
                                                                  (IN MILLIONS)
                                                                      
Revenues...................................................  $  26    $   4    $   4
                                                             -----    -----    -----
Net loss before minority interest..........................  $(136)   $(208)   $(157)
Minority interest..........................................     --       (5)     (17)
                                                             -----    -----    -----
Net loss...................................................  $(136)   $(203)   $(140)
                                                             =====    =====    =====


     The primary component of net loss before minority interest for the years
ended December 31, 2001, 2000 and 1999 was after-tax interest expense of $133
million, $192 million and $155 million, respectively. The decrease in interest
expense in 2001 is due to lower outstanding debt and lower interest rates. The
increase in interest expense in 2000 was principally due to increased debt
associated with the stock repurchase in April 2000.

ENVIRONMENTAL CLAIMS

     We continue to receive claims from insureds 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

                                        37


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.

     We have been, and continue to be, involved in litigation involving
insurance coverage issues pertaining to environmental claims. We believe that
some court decisions have interpreted the insurance coverage to be broader than
the original intent of the insurers and insureds. These decisions often pertain
to insurance policies that were issued by us 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 insured, and we do not keep track
of the monetary amount being sought in those few claims which indicate a
monetary amount.

     Our reserves for environmental claims are not established on a
claim-by-claim basis. We carry an aggregate bulk reserve for all of our
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 our experience in resolving those claims. At
December 31, 2001, approximately 75% of the net environmental reserve,
approximately $298 million, is carried in a bulk reserve and includes unresolved
and incurred but not reported environmental claims for which we have not
received any specific claims as well as for the anticipated costs of coverage
litigation disputes relating to these claims. The balance, approximately 25% of
the net environmental reserve, approximately $98 million, consists of case
reserves for resolved claims.

     Our reserving methodology is preferable to one based on "identified claims"
because the resolution of environmental exposures by us generally occurs by
settlement on an insured-by-insured basis as opposed to a claim-by-claim basis.
Generally, the settlement between us and the insured extinguishes any obligation
we may have under any policy issued to the insured for past, present and future
environmental liabilities as well as extinguishes any pending coverage
litigation dispute with the insured. 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 we 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 us. Our general
purpose in executing these agreements is to reduce our potential environmental
exposure and eliminate the risks presented by coverage litigation with the
insured and related costs.

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

     For further discussion of environmental claims and the risks involved, see
"Risk Factors -- Our business could be harmed because our potential exposure for
environmental claims is very difficult to predict."

     The duration of our 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 us, vary significantly and are dependent upon a number of factors.
These factors include, but are not limited to, the cooperation of the insured in
providing claim information, the pace of underlying litigation or claim
processes, the pace of coverage litigation between the insured and us and the
willingness of the insured and us to negotiate, if appropriate, a resolution of
any dispute pertaining to these claims. Because these factors vary from claim-
                                        38


to-claim and insured-by-insured, we cannot provide a meaningful average of the
duration of an environmental claim. However, based upon our experience in
resolving these claims, the duration may vary from months to several years.

     We also compare our historical direct and net loss and expense paid
experience, year-by-year, to assess any emerging trends, fluctuations or
characteristics suggested by the aggregate paid activity. The comparison
includes a review of the result derived from the division of the ending direct
and net reserves by last year's direct and net paid activity, also known as the
survival ratio.

     The following table displays activity for environmental losses and loss
expenses and reserves for the years ended December 31:



                                                              2001    2000    1999
                                                              -----   -----   -----
                                                                  (IN MILLIONS)
                                                                     
Beginning reserves:
  Direct....................................................  $ 669   $ 801   $ 928
  Ceded.....................................................   (111)   (125)    (96)
                                                              -----   -----   -----
  Net.......................................................    558     676     832
Incurred losses and loss expenses:
  Direct....................................................     58      75     139
  Ceded.....................................................    (12)    (11)    (82)
Losses paid:
  Direct....................................................    248     207     266
  Ceded.....................................................    (40)    (25)    (53)
                                                              -----   -----   -----
Ending reserves:
  Direct....................................................    479     669     801
  Ceded.....................................................    (83)   (111)   (125)
                                                              -----   -----   -----
  Net.......................................................  $ 396   $ 558   $ 676
                                                              =====   =====   =====


     Over the past three years, we have 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 us, as well as a continued reduction
in the number of policyholders with active environmental claims.

     As of December 31, 2001, the number of policyholders with pending coverage
litigation disputes pertaining to environmental claims was 216, approximately
11% less than the number pending as of December 31, 2000, and approximately 20%
less than the number pending as of December 31, 1999. Also, in 2001, there were
134 policyholders tendering for the first time an environmental remediation-type
claim to us. This compares to 158 policyholders doing so in 2000 and 256
policyholders in 1999.

     As of December 31, 2001, we had resolved the environmental liabilities
presented by 5,595 of the 6,214 policyholders who had tendered environmental
claims to us for approximately $1.88 billion (before reinsurance). This
resolution comprises 90% of the policyholders who have tendered these claims. We
generally have been successful in resolving our coverage litigation disputes and
continue to reduce our potential exposure through favorable settlements with
some insureds.

ASBESTOS CLAIMS AND LITIGATION

     We believe that the property and casualty insurance industry has suffered
from judicial interpretations that have attempted to maximize insurance
availability for asbestos claims from both a coverage and liability standpoint
far beyond the intent of the contracting parties. These policies generally were
issued prior to 1980. We continue to receive asbestos claims alleging insureds'
liability from claimants' asbestos-related injuries. Since the beginning of
2000, we have experienced an increase over prior years in the number of asbestos
claims being tendered to us, and we expect this trend to continue. Factors
leading to these increases include more intensive advertising by lawyers seeking
asbestos claimants, the increasing

                                        39


focus by plaintiffs on new and previously peripheral defendants and an increase
in the number of entities seeking bankruptcy protection as a result of
asbestos-related liabilities. In addition to contributing to the increase in
claims, the bankruptcy proceedings may have the effect of significantly
accelerating and increasing loss payments by insurers, including us.
Particularly during the last few months of 2001 and continuing into 2002, these
trends have both accelerated and become more visible.

     For further discussion of asbestos-related claims and litigation and the
risks involved, see "Risk Factors -- Our business could be harmed because our
potential exposure for asbestos claims and related litigation is very difficult
to predict."

     Because each insured presents different liability and coverage issues, we
evaluate those issues on an insured-by-insured basis. Our evaluations have not
resulted in any meaningful data from which an average asbestos defense or
indemnity payment may be determined.

     In establishing our asbestos reserves, we evaluate the exposure presented
by each insured. In the course of this evaluation, we consider: available
insurance coverage, including the role of any umbrella or excess insurance we
have issued to the insured; limits and deductibles; an analysis of each
insured's potential liability; the jurisdictions involved; past and anticipated
future claim activity; past settlement values of similar claims; allocated claim
adjustment expense; potential role of other insurance; the role, if any, of
non-asbestos claims or potential non-asbestos claims in any resolution process;
and applicable coverage defenses or determinations, if any, including the
determination as to whether or not an asbestos claim is a products/completed
operation claim subject to an aggregate limit and the available coverage, if
any, for that claim. Once the gross ultimate exposure for indemnity and
allocated claim adjustment expense is determined for each insured by each policy
year, we calculate 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.

     We also compare our historical direct and net loss and expense paid
experience, year-by-year, to assess any emerging trends, fluctuations or
characteristics suggested by the aggregate paid activity. The comparison
includes a review of the result derived from the division of the ending direct
and net reserves by last year's direct and net paid activity, also known as the
survival ratio.

     At December 31, 2001, approximately 81%, or approximately $665 million, of
the net asbestos reserves, represents incurred but not reported losses for which
we have not received any specific claims. The balance, approximately 19% of the
net asbestos reserves, or approximately $155 million, is for pending asbestos
claims. As in the past, asbestos claims, when submitted, rarely indicate the
monetary amount being sought by the claimant from the insured, and we do not
keep track of the monetary amount being sought in those few claims that
indicated a monetary amount. Based upon our experience with asbestos claims, the
duration period of an asbestos claim from the date of submission to resolution
is approximately two years.

                                        40


     In general, we post case reserves for pending asbestos claims within
approximately 30 business days of receipt of these claims. The following table
displays activity for asbestos losses and loss expenses and reserves for the
years ended December 31:



                                                               2001     2000     1999
                                                              ------   ------   ------
                                                                   (IN MILLIONS)
                                                                       
Beginning reserves:
  Direct....................................................  $1,005   $1,050   $1,252
  Ceded.....................................................    (199)    (223)    (266)
                                                              ------   ------   ------
  Net.......................................................     806      827      986
Incurred losses and loss expenses:
  Direct....................................................     283      187      128
  Ceded.....................................................     (94)    (137)     (71)
Losses paid:
  Direct....................................................     242      232      330
  Ceded.....................................................     (67)    (161)    (114)
                                                              ------   ------   ------
Ending reserves:
  Direct....................................................   1,046    1,005    1,050
  Ceded.....................................................    (226)    (199)    (223)
                                                              ------   ------   ------
  Net.......................................................  $  820   $  806   $  827
                                                              ======   ======   ======


UNCERTAINTY REGARDING ADEQUACY OF ENVIRONMENTAL AND ASBESTOS RESERVES

     It is difficult to estimate the reserves for environmental and
asbestos-related claims due to the factors described above. Conventional
actuarial techniques are not used to estimate these reserves.

     As a result of the processes and procedures described above, the reserves
carried for environmental and asbestos claims at December 31, 2001 are our best
estimate of ultimate claims and claim adjustment expenses based upon known facts
and current law. However, the uncertainties surrounding the final resolution of
these claims continue. These include, without limitation, the risks 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 we have issued for these claims, the
resolution or adjudication of some disputes pertaining to the amount of
available coverage for asbestos claims in a manner inconsistent with our
previous assessment of these claims, the number and outcome of direct actions
against us, and unanticipated developments pertaining to our ability to recover
reinsurance for environmental and asbestos claims. It is also not possible to
predict changes in the legal and legislative environment and their impact on the
future development of asbestos and environmental claims. This development will
be affected by future court decisions and interpretations, as well as changes in
applicable legislation.


     Because of the uncertainties set forth above, additional liabilities may
arise for amounts in excess of the current related reserves. These additional
amounts, or a range of these additional amounts, cannot now be reasonably
estimated and could result in liability exceeding these reserves by an amount
that could be material to our operating results and financial condition in
future periods. Because the level of uncertainty continues to increase and in
order to strengthen our ability and flexibility to advance our strategic goals
we will, prior to the completion of this offering, enter into an agreement with
Citigroup under which it will provide us with significant financial support for
asbestos claims and related litigation, up to $800 million, reduced by the tax
effect of the highest applicable federal income tax rate, which we believe will
substantially enhance our ability to manage possible adverse developments in the
future. This agreement with Citigroup is described in more detail in the
"Arrangements Between Our Company and Citigroup" section of this prospectus.


                                        41


CUMULATIVE INJURY OTHER THAN ASBESTOS (CIOTA) CLAIMS

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

     Due to claimants' allegations of long-term bodily injury in CIOTA claims,
numerous complex issues regarding these claims are presented. The claimants'
theories of liability must be evaluated, the evidence pertaining to a causal
link between injury and exposure to a substance must be reviewed, the potential
role of other causes of injury must be analyzed, the liability of other
defendants must be explored, an assessment of a claimant's damages must be made
and the law of the applicable jurisdiction must be analyzed. In addition, we
must review the number of policies we have issued to the insured and whether
these policies are triggered by the allegations, the terms and limits of
liability of these policies, the obligations of other insurers to respond to the
claim and the role, if any, of non-CIOTA claims or potential non-CIOTA claims in
any resolution process.

     To the extent disputes exist between us and a policyholder regarding the
coverage available for CIOTA claims, we resolve the disputes, where feasible,
through settlement with the policyholder or through coverage litigation.
Historically, our experience has indicated that insureds with potentially
significant environmental and/or asbestos exposures may often have other CIOTA
exposures or CIOTA claims pending with us. Due to this experience and the fact
that settlement agreements with insureds may extinguish our obligations for all
claims, we evaluate and consider the environmental and asbestos reserves in
conjunction with the CIOTA reserve. Generally, the terms of a settlement
agreement set forth the nature of our participation in resolving CIOTA claims
and the scope of coverage to be provided by us, and contain the appropriate
indemnities and hold harmless provisions to protect us. These settlements
generally eliminate uncertainties for us regarding the risks extinguished,
including the risk that losses would be greater than anticipated due to evolving
theories of tort liability or unfavorable coverage determinations. Our approach
also has the effect of determining losses at a date earlier than would have
occurred in the absence of these settlement agreements. On the other hand, in
cases where future developments are favorable to insurers, this approach could
have the effect of resolving claims for amounts in excess of those that we
ultimately would have paid had the claims not been settled in this manner.

     At December 31, 2001, approximately 80%, or approximately $569 million, of
the net CIOTA reserve represents incurred but not reported losses for which we
have not received any specific claims. The balance, approximately 20% of the net
CIOTA reserve, or approximately $141 million, is for pending CIOTA claims.

                                        42


     The following table displays activity for CIOTA losses and loss expenses
and reserves for the years ended December 31:



                                                               2001      2000      1999
                                                              ------    ------    ------
                                                                    (IN MILLIONS)
                                                                         
Beginning reserves:
  Direct....................................................  $1,079    $1,184    $1,346
  Ceded.....................................................    (280)     (313)     (392)
                                                              ------    ------    ------
  Net.......................................................     799       871       954
Incurred losses and loss expenses:
  Direct....................................................    (115)       27       (36)
  Ceded.....................................................      70       (11)       28
Losses paid:
  Direct....................................................      71       132       126
  Ceded.....................................................     (27)      (44)      (51)
                                                              ------    ------    ------
Ending reserves:
  Direct....................................................     893     1,079     1,184
  Ceded.....................................................    (183)     (280)     (313)
                                                              ------    ------    ------
  Net.......................................................  $  710    $  799    $  871
                                                              ======    ======    ======


INVESTMENT PORTFOLIO

     Our invested assets at December 31, 2001 totaled $32.6 billion, of which
88% was invested in fixed maturity and short-term investments, 3% in common
stocks and other equity securities, 1% in mortgage loans and real estate held
for sale and 8% in other investments. The average yield, excluding realized and
unrealized investment gains and losses, was 6.8%, 7.5% and 7.2% for the years
ended December 31, 2001, 2000 and 1999, respectively. The after-tax average
yield, excluding realized and unrealized investment gains and losses, was 5.0%,
5.4% and 5.2% for the years ended December 31, 2001, 2000 and 1999,
respectively.

     Because the primary purpose of the investment portfolio is to fund future
claims payments, we employ a conservative investment philosophy. Our fixed
maturity portfolio at December 31, 2001 totaled $25.9 billion, comprised of
$24.1 billion of publicly traded fixed maturities and $1.8 billion of private
fixed maturities. The weighted average quality ratings of our publicly traded
fixed maturity portfolio and private fixed maturity portfolio at December 31,
2001 were Aa3 and Baa1, respectively. Included in the fixed maturity portfolio
at that date was approximately $1.7 billion of below investment grade
securities. The average duration of the fixed maturity portfolio, including
short-term investments, was 5.7 years at that date.

     The following table sets forth our combined fixed maturity investment
portfolio classified by Moody's Investor's Service Inc. ratings as of December
31, 2001:



                                                              CARRYING    PERCENT OF TOTAL
                                                               VALUE       CARRYING VALUE
                                                              --------    ----------------
                                                                     (IN MILLIONS)
                                                                    
Quality Rating:
  Aaa.......................................................  $13,123           50.8%
  Aa........................................................    4,564           17.6
  A.........................................................    2,845           11.0
  Baa.......................................................    3,573           13.8
                                                              -------          -----
  Total investment grade....................................   24,105           93.2
  Non-investment grade......................................    1,746            6.8
                                                              -------          -----
  Total fixed maturity investment...........................  $25,851          100.0%
                                                              =======          =====


                                        43


     We make investments in collateralized mortgage obligations, or CMOs. CMOs
typically have high credit quality, offer good liquidity, and provide a
significant advantage in yield and total return compared to U.S. Treasury
securities. Our investment strategy is to purchase CMO tranches which offer the
most favorable return given the risks involved. One significant risk evaluated
is prepayment sensitivity. This drives the investment process to generally favor
prepayment protected CMO tranches including planned amortization classes and
last cash flow tranches. We do not purchase residual interests in CMOs.

     At December 31, 2001, we held CMOs with a fair value of $3.3 billion.
Approximately 54% of CMO holdings were fully collateralized by GNMA, FNMA or
FHLMC securities at that date, and the balance was fully collateralized by
portfolios of individual mortgage loans. In addition, we held $2.3 billion of
GNMA, FNMA, FHLMC or FHA mortgage-backed pass-through securities at December 31,
2001. Virtually all of these securities are rated Aaa.

     We make investments in equity investments, primarily through private equity
and arbitrage partnerships, which are subject to more volatility than our fixed
income investments, but historically have provided a higher return. At December
31, 2001, the carrying value of our investments in private equity and arbitrage
partnerships was $1.6 billion.

OUTLOOK

     A variety of factors continue to affect the property and casualty insurance
market and our core business outlook, including improvement in pricing in the
commercial lines marketplace as evidenced by price increases, a continuing
highly competitive personal lines marketplace, inflationary pressures on loss
cost trends, including medical inflation and increasing auto loss costs,
asbestos related developments and rising reinsurance and litigation costs.

PROPERTY CASUALTY INSURANCE INDUSTRY

     The property and casualty insurance industry continues to be reshaped by
consolidation and globalization. Our strategic objectives are to enhance our
position as a consistently profitable market leader and a cost-effective
provider of property and casualty insurance in the United States, as the
industry consolidates.

     Changes in the general interest rate environment affect the return received
on newly invested and reinvested funds. While a rising interest rate environment
enhances the returns available, it reduces the market value of existing fixed
maturity investments and the availability of gains on disposition. A decline in
interest rates reduces the return available on investment of funds but creates
the opportunity for realized investment gains on disposition of fixed maturity
investments.

     As required by various state laws and regulations, our insurance
subsidiaries are subject to assessments from state-administered guaranty
associations, second-injury funds and similar associations. We believe that
these assessments will not have a material impact on our results of operations.

     Some social, economic, political and litigation issues have led to an
increased number of legislative and regulatory proposals aimed at addressing the
cost and availability of some types of insurance as well as the claim and
coverage obligations of insurers. While most of these provisions have failed to
become law, these initiatives may continue as legislators and regulators try to
respond to public availability, affordability and claim concerns and the
resulting laws, if any, could adversely affect our ability to write business
with appropriate returns.

  COMMERCIAL LINES

     In 2001, the trend of higher rates continued in Commercial Lines. Prices
generally rose throughout the year, although some of the increases varied
significantly by region and business segment. These increases were necessary to
offset the impact of rising loss cost trends and the decline in profitability
from the competitive pressures of the last several years. Since the terrorist
attack on September 11th, there has

                                        44


been greater concern over the availability, terms and conditions, and pricing of
reinsurance. As a result, the primary insurance market is expected to continue
to see significant rate increases for some coverages.

     In National Accounts, where programs include risk management services, such
as claims settlement, loss control and risk management information services,
generally offered in connection with a large deductible or self-insured program,
and risk transfer, typically provided through a guaranteed cost or
retrospectively rated insurance policy, pricing improved during 2001 and 2000.
National Accounts has benefited from higher rates on both new and renewal
business as evidenced by the improving profit margins earned on this business.
We believe that pricing will continue to firm into 2002. However, we will
continue to reject business that is not expected to produce acceptable returns.
Included in National Accounts is service fee income for policy and claim
administration of several states' Workers' Compensation Residual Market pools.
After several years of depopulation, these pools are growing significantly as
the primary market is firming. Premium that we service for these pools grew 76%
in 2001 compared to 2000 and is expected to continue to grow significantly.

     Commercial Accounts achieved double-digit price increases on renewal
business during 2001 and 2000, improving the overall profit margin in this
business and offsetting the impacts of rising loss cost inflation, medical
inflation and reinsurance costs. We will continue to seek significant rate
increases in 2002, as pricing in some areas and business segments still has not
improved to the point of producing acceptable returns.

     In Select Accounts, the trend toward increased pricing on renewal business
that started in late 1999 gained momentum in 2000 and continued to improve
during 2001. Prices generally rose during this time frame while customer
retention remained consistent with prior periods. Price increases varied
significantly by region, industry and product. However, the ability of Select
Accounts to achieve future rate increases is subject to regulatory constraints
in some jurisdictions. Loss cost trends in Select Accounts also worsened in
2001, especially in workers' compensation and property. The impact of these
negative loss cost trends has been partially offset by our continued disciplined
approach to underwriting and risk selection. We will continue to pursue business
based on our ability to achieve acceptable returns.

     Bond achieved significant growth in 2001 and 2000, with the acquisition of
Reliance Surety cementing a leadership position in the surety bond marketplace
by broadening product and service capabilities. In addition, our expanding array
of products and recognized expertise in the executive liability marketplace has
enabled Bond to further enhance its product and customer diversification and
profit opportunities. Bond's focus remains on underwriting and selling their
products to customers that provide the greatest opportunity for profit. Bond is
also focused on our efforts to cross-sell our expanding array of specialty
products to existing customers of Commercial Lines and Personal Lines. In Bond,
prices in both of its markets began to modestly increase in late 2001. In 2001,
Bond and the industry have experienced an increase in claim frequency and
severity in the most recent accident years. This increase in claim frequency and
severity has impacted the primary insurer and reinsurance capacity in our
marketplace. This decrease in capacity is expected to create opportunities for
further price increases for all products in 2002, although the worsening loss
cost trends and increased cost of reinsurance will offset some of the positive
impact.

     In Gulf, rate increases began in most lines of business in 2001 although
specific increases varied significantly by region, industry and product.
Improvement was most evident in the umbrella and excess and surplus lines of
business, with lesser increases achieved in the professional liability lines of
business. In most areas of the business, capacity has dissipated due to
reinsurance constriction, which should lead to further rate increases throughout
2002. The favorable impact from rate improvement continues to be offset by
rising loss costs. Gulf will reduce its exposure in products and business
segments where acceptable returns have not been achieved. Gulf scaled back its
assumed reinsurance business in 2001 and at the same time began to restructure
its transportation and property business. We are currently engaged in
discussions with a potential minority investor in Gulf pursuant to which such
investor would acquire debt and up to 20% equity interest in Gulf. The
transaction, if agreed to, would be subject to customary

                                        45


conditions. We have tentatively agreed that, if we proceed, we would grant the
investor customary "demand" and "piggyback" registration rights with respect to
its investment in Gulf.

     Insurers generally, including us, are experiencing an increase in the
number of asbestos-related claims due to, among other things, more intensive
advertising by lawyers seeking asbestos claimants, the increasing focus by
plaintiffs on new and previously peripheral defendants and an increase in the
number of entities seeking bankruptcy protection as a result of asbestos-related
liabilities. In addition to contributing to the increase in claims, the
bankruptcy proceedings may have the effect of significantly accelerating and
increasing loss payments by insurers, including us. 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. Particularly
during the last few months of 2001 and continuing into 2002, the
asbestos-related trends described above have both accelerated and become more
visible. In addition, these claims and the related litigation could result in
liability exceeding these reserves by an amount that could be material to our
operating results and financial condition in future periods. Because the level
of uncertainty continues to increase and in order to strengthen our ability and
flexibility to advance our strategic goals following this offering, Citigroup
has offered to enter into an agreement under which it will provide us with
significant financial support for asbestos claims and related litigation, up to
$800 million, reduced by the tax effect of the highest applicable federal income
tax rate, which we believe will substantially enhance our ability to manage
possible adverse developments in the future. This agreement with Citigroup is
described in more detail in the "Arrangements Between Our Company and Citigroup"
section of this prospectus.

     See "Risk Factors -- Our business could be harmed because our potential
exposure for asbestos claims and related litigation is very difficult to
predict," "-- Asbestos Claims and Litigation" and "-- Uncertainty Regarding
Adequacy of Environmental and Asbestos Reserves."

  PERSONAL LINES

     Personal Lines' strategy includes control of operating expenses to improve
competitiveness and profitability, growth in sales primarily through independent
agents and selective expansion of additional marketing channels to broaden
distribution to a wider customer base. These growth strategies also provide
opportunities to leverage the existing cost structure and achieve economies of
scale. In addition, Personal Lines continues to take action to control its
exposure to catastrophe losses, including limiting the writing of new homeowners
business in some markets, implementing price increases in some hurricane-prone
areas and non-renewing policies in some hurricane-prone areas where acceptable
returns are not being achieved, subject to restrictions imposed by insurance
regulatory authorities.

     The personal auto insurance marketplace remains highly competitive as some
personal auto carriers have been reluctant to increase prices to fully offset
increases in loss cost trends due to inflationary pressures in medical costs and
auto repair costs. These trends are expected to continue into 2002. Personal
Lines will continue to emphasize underwriting discipline in this competitive
marketplace and continue to pursue its strategy of increases in auto rates to
offset increases in loss cost trends. Market conditions for homeowners insurance
have remained stable, with the industry experiencing modest rate increases.
Personal Lines expects homeowners rate increases to continue in 2002. Homeowners
loss cost trends continue to increase at modest levels, reflecting inflationary
pressures and the increased frequency of weather-related losses.

     The personal lines insurance market shows indications of contraction as a
result of the terrorist attack on September 11th. Several personal lines
carriers have ceased writing new policies and begun non-renewal of existing
policies. As carriers fail to renew policies and exit markets, Personal Lines is
well positioned with its independent agents to take advantage of this
opportunity to properly underwrite and bind this new business.

                                        46


TRANSACTIONS WITH RELATED PARTIES

     We have agreed with Citigroup that, promptly following the completion of
this offering, we will take all reasonable action to negotiate in good faith the
terms of a transition services agreement for the provision of facilities
sharing, systems, corporate, administrative and other existing shared services
to take effect after the distribution. This agreement will reflect pricing terms
for these services to be mutually agreed upon subject to all applicable
regulatory requirements. The term for the provision of each service will be
determined on a case by case basis up to a maximum term of one year and subject
to an extension for a second year for various services and upon advance notice.
We intend to develop our internal capabilities in the future in order to reduce
our reliance on Citigroup for such services.

     Citigroup has provided corporate staff services, including legal, internal
audit and other services, to us at cost under a service reimbursement agreement
and may, but will not be obligated to continue to do so following completion of
the distribution.

     We intend to enter into an agreement under which a Citigroup affiliate will
provide investment advisory services to us for a period of two years from the
completion of this offering at fees to be mutually agreed upon.

     You should refer to the "Arrangements Between Our Company and Citigroup"
section of this prospectus and to note 15 to our consolidated financial
statements for a description of these and other intercompany arrangements and
transactions between us and Citigroup.

LIQUIDITY AND CAPITAL RESOURCES

     Our principal asset is the capital stock of TIGHI and its insurance
subsidiaries.

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

     Net cash flows are generally invested in marketable securities. We closely
monitor the duration of these investments, and investment purchases and sales
are executed with the objective of having adequate funds available to satisfy
our maturing liabilities. As our 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. Our invested assets at
December 31, 2001 totaled $32.6 billion, of which 88% was invested in fixed
maturity and short-term investments, 3% in common stocks and other equity
securities, 1% in mortgage loans and real estate and 8% in other investments.

     Our cash flow needs include shareholder dividends and debt service. We are
a holding company and have no direct operations. Accordingly, we meet our cash
flow needs primarily through dividends from operating subsidiaries. We also have
available to us a $250 million revolving line of credit from Citigroup. We pay a
commitment fee to Citigroup for that line of credit, which expires in 2006. This
agreement became effective on December 19, 2001 and replaced a facility which we
previously had from a syndicate of banks. The interest rate for borrowings under
this committed line is based on the cost of commercial paper issued by Citicorp.
We also issue commercial paper directly to investors and maintain unused credit
availability under our committed credit facility at least equal to the amount of
commercial paper outstanding. At December 31, 2001, there were no outstanding
borrowings under this revolving line of credit from Citigroup or any commercial
paper outstanding.

                                        47


     Contractual obligations at December 31, 2001 included the following:



                                                                   PAYMENTS DUE BY PERIOD
                                                       ----------------------------------------------
                                                       LESS THAN                               AFTER
                                             TOTAL      1 YEAR      1-3 YEARS    4-5 YEARS    5 YEARS
                                             ------    ---------    ---------    ---------    -------
                                                                  (IN MILLIONS)
                                                                               
Notes payable to affiliates................  $1,697      $ --         $500        $1,197      $   --
Long-term debt.............................     380        --           --           150         230
TIGHI-obligated mandatorily redeemable
  securities of subsidiary trusts holding
  solely junior subordinated debt
  securities of TIGHI......................     900        --           --            --         900
Operating leases...........................     431       111          141            67         112
                                             ------      ----         ----        ------      ------
                                             $3,408      $111         $641        $1,414      $1,242
                                             ======      ====         ====        ======      ======


     In the normal course of business, we have unfunded commitments to
partnerships. These commitments were $792 million and $729 million at December
31, 2001 and 2000, respectively.

     At December 31, 2000, we had a note payable to PFS Services, Inc., our
direct parent. At December 31, 2000, the principal outstanding was $287 million.
Interest accrued at a rate of 5.06%, compounded semi-annually. On March 29,
2001, we repaid this note in its entirety, plus accrued interest.

     In conjunction with the purchase of TIGHI's outstanding shares in April
2000, we entered into a note agreement with Citigroup. On February 7, 2002, this
note agreement was replaced by a new note agreement. Under the terms of the new
note agreement, interest accrues on the aggregate principal amount outstanding
at Citicorp's commercial paper rate (the then current short-term rate) plus 10
basis points per annum. Interest is compounded monthly. The principal amount of
the note may be prepaid in whole or in part without penalty and is due on April
30, 2005. At December 31, 2001 and 2000, the principal outstanding under the
prior note agreement was $1.2 billion and $1.9 billion, respectively. At March
1, 2002, the outstanding amount under the new note agreement was $1.1 billion.

     On April 13, 2001, we entered into a $500 million line of credit agreement
with Citicorp Banking Corporation, an affiliate. On April 16, 2001, TIGHI
borrowed $275 million on the line of credit. Proceeds from this borrowing
together with $225 million of commercial paper proceeds were used to pay a $500
million 6.75% long-term note. On November 8, 2001, we borrowed another $225
million under the line of credit. The proceeds were used to pay off maturing
commercial paper. The maturity for all $500 million borrowed under this line was
extended to November 7, 2003 and the interest rate was fixed at 3.60%.

     On October 1, 1999 and September 1, 1999, we repaid $200 million for our
6.25% notes and $200 million for our 6.75% notes, respectively, which matured on
those dates. Long-term debt outstanding at December 31, 2001 was as follows:



                                                                    AS OF
                                                              DECEMBER 31, 2001
                                                              -----------------
                                                                (IN MILLIONS)
                                                           
6.75% Notes due 2006........................................        $150
7.81% Note due 2011.........................................          30
7.75% Notes due 2026........................................         200
                                                                    ----
Total.......................................................        $380
                                                                    ====


     Concurrently with this offering, we are offering $850 million aggregate
principal amount of our convertible notes, plus up to an additional $42.5
million aggregate principal amount of notes if the over-allotment option for
that offering is exercised in full.

     In February 2002, our board of directors declared a dividend of $1.0
billion to Citigroup in the form of a non-interest bearing note payable on
December 31, 2002. We expect to repay this note from future earnings, to the
extent available.

                                        48


     In February 2002, our board of directors also declared a dividend of $3.7
billion to Citigroup in the form of a $3.7 billion note payable in two
installments. The first installment of $150 million will be payable on May 9,
2004 and the second installment of $3.55 billion will be payable on February 7,
2017. This note begins to bear interest after May 9, 2002 at a rate of 7.25% per
annum. This note may be prepaid at any time in whole or in part without penalty
or premium. We expect that substantially all of this note will be prepaid with
the proceeds of the offerings.

     Our principal insurance subsidiaries are domiciled in the State of
Connecticut. The insurance holding company law of Connecticut applicable to our
subsidiaries requires notice to, and approval by, the state insurance
commissioner for the declaration or payment of any dividend that together with
other distributions made within the preceding twelve months exceeds the greater
of 10% of the insurer's surplus as of the preceding December 31, or the
insurer's net income for the twelve-month period ended the preceding December
31, in each case determined in accordance with statutory accounting practices.
This declaration or payment is further limited by adjusted unassigned surplus,
as determined in accordance with statutory accounting practices. The insurance
holding company laws of other states in which our subsidiaries are domiciled
generally contain similar, although in some instances somewhat more restrictive,
limitations on the payment of dividends. A maximum of $1.0 billion will be
available by the end of 2002 for such dividends without prior approval of the
Connecticut Insurance Department. However, the payment of a significant portion
of this amount is likely to be subject to approval by the Connecticut Insurance
Department in accordance with the formula described above, depending upon the
amount and timing of the payments.

     Under an intercompany agreement, we may not pay any dividends on our common
stock, other than regular quarterly dividends, without the prior written consent
of Citigroup, so long as Citigroup maintains ownership of an agreed upon
percentage of our common stock. This agreement also limits our ability to incur
indebtedness, issue equity securities and make some capital expenditures, among
other things, without the prior written consent of Citigroup.

     We have the option to defer interest payments on the notes. If we elect to
defer interest payments on the notes, we will not be permitted, with limited
exceptions, to pay dividends on our common stock during a deferral period.

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

     The NAIC adopted RBC requirements for property casualty companies to be
used as minimum capital requirements by the NAIC and states to identify
companies that merit further regulatory action. The formulas have not been
designed to differentiate among adequately capitalized companies that operate
with levels of capital higher than RBC requirements. Therefore, it is
inappropriate and ineffective to use the formulas to rate or to rank these
companies. At December 31, 2001, all of our insurance subsidiaries had adjusted
capital in excess of amounts requiring any company or regulatory action.

     It is the opinion of our management that the realization of our recognized
net deferred tax asset of $1.2 billion is more likely than not based on existing
carryback ability and expectations as to future taxable income. We are included
in the consolidated federal income tax return filed by Citigroup. Citigroup has
reported pre-tax financial statement income of approximately $20 billion on
average over the last three years and has generated federal taxable income
exceeding $13 billion on average in each year during the same period.

     It is the opinion of our management that on a separate reporting basis the
realization of the recognized deferred tax asset of $1.2 billion is more likely
than not based on existing carryback ability and expectations as to our future
taxable income. We have reported pre-tax financial statement income of $1.6
billion, on average, over the last three years and have generated federal
taxable income exceeding $770 million, on average, in each year during this same
period.

                                        49


     We provided surety bonds to affiliates of JPMorgan Chase in connection with
performance obligations of two subsidiaries of Enron. We are in litigation in
New York over whether we are obligated to perform under these bonds. In December
2001, Enron filed for Chapter 11 bankruptcy protection and JPMorgan Chase made
claims against these bonds. The demand against us, based on our aggregate
participation in the bonds, is approximately $266 million before any
reinsurance, recoveries and taxes. In December 2001, all defendants filed
answers and counterclaims to the complaint and on December 31, 2001, the
plaintiff filed a motion for summary judgment which was denied on March 5, 2002.
We are vigorously defending the lawsuit and it is the opinion of our management
that we have meritorious defenses.

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

     Some of our loss reserves are for environmental and asbestos claims and
related litigation. Although the reserves carried for environmental and asbestos
claims at December 31, 2001 are our best estimate of ultimate claims and claim
adjustment expenses based upon known facts and current law, given the
uncertainty surrounding the final resolution of these claims, it is possible
that actual liabilities could exceed reserves by an amount that could be
material to our operating results and financial condition in future periods.
Because the level of uncertainty continues to increase and in order to
strengthen our ability and flexibility to advance our strategic goals following
the public offering, Citigroup has offered to enter into an agreement under
which it will provide us with significant financial support for asbestos claims
and related litigation, up to $800 million, reduced by the tax effect of the
highest applicable federal income tax rate, which we believe will substantially
enhance our ability to manage possible adverse developments in the future. See
the discussion of environmental and asbestos claims above.

     Reserves for losses and loss adjustment expenses on a statutory basis were
$20.2 billion, $19.4 billion and $19.9 billion, at December 31, 2001, 2000 and
1999, respectively. The increase from December 31, 2000 to December 31, 2001
includes the impact of the terrorist attack on September 11th and the
acquisition of Northland and contribution of CitiCapital in October 2001. This
was partially offset by net payments of $427 million for environmental, asbestos
and other cumulative injury claims. The 2000 decrease also included net payments
of $341 million for such claims. This decrease was also impacted by favorable
prior-year reserve development combined with a shift in business mix from
longer-tail business to shorter-tail business.

     During April 2000, we completed a cash tender offer and merger, as a result
of which TIGHI became our wholly-owned subsidiary. In the tender offer and
merger, we acquired all of TIGHI's outstanding shares that were not already
owned by us, representing approximately 14.8% of TIGHI's outstanding common
stock, for approximately $2.4 billion in cash financed by a loan from Citigroup.

     We have agreed to purchase from Citigroup the premises located at One Tower
Square, Hartford, Connecticut and other properties, for $68 million.

                                        50


     We participate in the Citigroup Capital Accumulation Plan (CAP). For the
2000 and 1999 restricted stock awards, participating officers and other key
employees received 50% of their restricted stock award in the form of Citigroup
common stock and received 50% in the form of TIGHI common stock. In connection
with the cash tender offer completed by us in 2000, all shares of restricted
common stock under TIGHI CAP were eliminated and substantially all were replaced
with restricted Citigroup common stock. All of the 2001 restricted stock awards
granted on January 16, 2001 were in the form of Citigroup common stock. These
restricted stock awards generally vest after a three-year period and, except
under limited circumstances, the stock can not be sold or transferred during the
restricted period by the participant, who is required to render service to us
during the restricted period. Unearned compensation expense associated with the
Citigroup restricted common stock grants, which represents the market value of
Citigroup's common stock at the date of grant, and the remaining unamoritized
portion of the previous TIGHI CAP shares, is included with other assets in the
consolidated balance sheet and is recognized as a charge to income ratably over
the vesting period. The after-tax compensation cost charged to earnings for
these restricted stock awards was $19 million, $16 million and $16 million for
the years ended December 31, 2001, 2000 and 1999, respectively. See note 15 to
our consolidated financial statements for a discussion of Citigroup restricted
common stock awards.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

     See note 1 to our consolidated financial statements for a discussion of
recently issued accounting pronouncements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  MARKET RISK

     Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates, and
other relevant market rate or price changes. Market risk is directly influenced
by the volatility and liquidity in the markets in which the related underlying
assets are traded. The following is a discussion of our primary market risk
exposures and how those exposures are currently managed as of December 31, 2001.
Our market risk sensitive instruments, including derivatives, are primarily
entered into for purposes other than trading.

     The carrying value of our investment portfolio as of December 31, 2001 and
2000 was $32.6 billion and $30.8 billion, respectively, of which 79% and 81% was
invested in fixed maturity securities, respectively. The primary market risk to
the investment portfolio is interest rate risk associated with investments in
fixed maturity securities. Our exposure to equity price risk and foreign
exchange risk is not significant. We have no direct commodity risk.

     For fixed maturity securities, short-term liquidity needs and the potential
liquidity needs of the business are key factors in managing the portfolio. The
portfolio duration relative to the liabilities' duration is primarily managed
through cash market transactions.

     For our investment portfolio, there were no significant changes in our
primary market risk exposures or in how those exposures are managed compared to
the year ended December 31, 2000. We do not currently anticipate significant
changes in our primary market risk exposures or in how those exposures are
managed in future reporting periods based upon what is known or expected to be
in effect in future reporting periods.

     The primary market risk for all of our long-term debt and mandatorily
redeemable securities of subsidiary trusts, or trust securities, is interest
rate risk at the time of refinancing. All of our non-affiliate fixed rate debt
is non-redeemable. On April 13, 2001, we entered into a $500 million line of
credit agreement with Citicorp Banking Corporation, an affiliate. On April 16,
2001, we borrowed $275 million on the line of credit. Proceeds from this
borrowing together with $225 million of commercial paper proceeds were used to
pay a $500 million 6.75% long-term note payable. On November 8, 2001, we
borrowed another $225 million under the line of credit. The proceeds were used
to pay off maturing

                                        51


commercial paper. The maturity for all $500 million borrowed under this line was
extended to November 7, 2003 and the interest rate was fixed at 3.60%. We
currently have the right to redeem the fixed rate trust securities, in whole or
in part, at a redemption price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest to the redemption date. We
continue to monitor the interest rate environment and to evaluate refinancing
opportunities as maturity dates approach. For additional information regarding
our long-term debt and trust securities see notes 8 and 10 to our consolidated
financial statements.

     In conjunction with the purchase of TIGHI's outstanding shares in April
2000, we entered into a note agreement with Citigroup. On February 7, 2002, this
note agreement was replaced by a new note agreement. Under the terms of the new
note agreement, interest accrues on the aggregate principal amount outstanding
at Citicorp's commercial paper rate (the then current short-term rate) plus 10
basis points per annum. Interest is compounded monthly. The principal amount of
the note may be prepaid in whole or in part without penalty and is due on April
30, 2005. At December 31, 2001 and 2000, the principal outstanding under the
prior note agreement was $1.2 billion and $1.9 billion, respectively. At March
1, 2002, the outstanding amount under the new note agreement was $1.1 billion.

  SENSITIVITY ANALYSIS

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

     In this sensitivity analysis model, we use fair values to measure our
potential loss. The sensitivity analysis model includes the following financial
instruments entered into for purposes other than trading: fixed maturities,
interest-bearing non-redeemable preferred stocks, mortgage loans, short-term
securities, cash, investment income accrued, notes payable to affiliates,
long-term debt, fixed rate trust securities and derivative financial
instruments. The primary market risk to our market sensitive instruments is
interest rate risk. The sensitivity analysis model uses a 100 basis point change
in interest rates to measure the hypothetical change in fair value of financial
instruments included in the model.

     For invested assets, duration modeling is used to calculate changes in fair
values. Durations on invested assets are adjusted for call, put and interest
rate reset features. Duration on tax-exempt securities is adjusted for the fact
that the yield on such securities is less sensitive to changes in interest rates
compared to Treasury securities. Invested asset portfolio durations are
calculated on a market value weighted basis, including accrued investment
income, using holdings as of December 31, 2001 and 2000.

     For long-term debt and fixed rate trust securities, the change in fair
value is determined by calculating hypothetical December 31, 2001 and 2000
ending prices based on yields adjusted to reflect a 100 basis point change,
comparing such hypothetical ending prices to actual ending prices, and
multiplying the difference by the par or securities outstanding.

     The sensitivity analysis model we use produces a loss in fair value of
market sensitive instruments of $1.5 billion and $1.2 billion based on a 100
basis point increase in interest rates as of December 31, 2001 and 2000,
respectively. This loss value only reflects the impact of an interest rate
increase on the fair value of our financial instruments, which constitute
approximately 52% of total assets and approximately 9% of total liabilities as
of December 31, 2001 and approximately 54% of total assets and approximately 9%
of total liabilities as of December 31, 2000. As a result, the loss value
excludes a significant portion of our consolidated balance sheet which would
materially mitigate the impact of the loss in fair value associated with a 100
basis point increase in interest rates.

                                        52


     For example, some non-financial instruments, primarily insurance accounts
for which the fixed maturity portfolio's primary purpose is to fund future
claims payments, are not reflected in the development of the above loss value.
These non-financial instruments include premium balances receivable, reinsurance
recoverables, claims and claim adjustment expense reserves and unearned premium
reserves. Our sensitivity model also calculates a potential loss in fair value
with the inclusion of these non-financial instruments. For non-financial
instruments, changes in fair value are determined by calculating the present
value of the estimated cash flows associated with such instruments using
risk-free rates as of December 31, 2001 and 2000, calculating the resulting
duration, then using that duration to determine the change in value for a 100
basis point change.

     Based on the sensitivity analysis model we use, 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 December 31, 2001
and 2000 is not material.

                                        53


                                    BUSINESS

OVERVIEW

     We are a leading property and casualty insurance company in the United
States. We provide a wide range of commercial and personal property and casualty
insurance products and services to businesses, government units, associations
and individuals. We conduct our operations through our indirect wholly-owned
subsidiaries in two business segments: Commercial Lines, which provides a
variety of commercial coverages to a broad spectrum of business clients, and
Personal Lines, which primarily offers automobile and homeowners insurance to
individuals. Commercial coverages and personal coverages accounted for 58% and
42%, respectively, of our combined net written premiums for the year ended
December 31, 2001. After giving pro forma effect to the offerings, and the use
of the proceeds from the offerings, our corporate reorganization and related
transactions, at December 31, 2001, we had total assets and shareholders' equity
of $57.6 billion and $9.8 billion, respectively.

OUR COMPETITIVE ADVANTAGES

     We believe that we are uniquely positioned within the property and casualty
insurance industry to benefit from an improving underwriting environment. Our
competitive advantages are based on:

     - superior financial strength as a result of strong capitalization levels
       and consistent operating returns;

     - a recognized brand name with leading market positions, broad scale and
       product breadth in many commercial and personal product lines and
       geographies;

     - an experienced management team with a broad complement of skills;

     - a consistent record of strong operating returns which are driven by a
       performance-based management and underwriting culture;

     - proprietary management information systems that support detailed
       attention to risk management and returns analysis in order to maximize
       underwriting results;

     - demonstrated long-term commitment to the independent agency and broker
       distribution system with a consistent underwriting philosophy;

     - industry-leading technology which enables us to cost effectively provide
       differentiated service to agents and customers; and

     - proven acquisition and integration expertise which will allow us to
       participate in consolidation within the property and casualty industry.

OUR STRATEGY

     Our strategic objectives are to deliver superior returns, leveraging our
position as a consistently profitable market leader and cost-effective provider
of property and casualty insurance in the United States. We are an underwriting
company that bases its success on a disciplined, performance-based culture.

     A key element in achieving our objectives is our senior management team
comprised of individuals with significant industry experience and a broad
complement of skills, operating in an underwriting culture. We believe that the
continuity and collaborative culture of this group, together with our strong
financial resources, will promote our achievement of the goals described below.

  FOCUS ON CORE PRODUCT LINES USING A DISCIPLINED AND PERFORMANCE-BASED
  UNDERWRITING APPROACH

     We will continue to focus on our core property and casualty insurance
product lines and markets for which we have developed selective and consistent
underwriting policies that have been demonstrated to be effective over time. We
emphasize a profit-oriented approach to underwriting rather than focusing on

                                        54


premium volume or market share. Management at every level reviews detailed
information on the profit performance of their business monthly. Key components
of the system are:

     - regular reviews of the quality of the business to assess loss experience
       and pricing parameters;

     - periodic reviews and audits of field offices and agents to ensure that
       our policies and procedures are being consistently and appropriately
       applied; and

     - incentive compensation which is closely linked to measurable performance.

We have developed an approach to writing business built upon significant
underwriting, claims, engineering and actuarial experience. That specialized
knowledge about various customer groups and catastrophe exposures allows us to
analyze risk and customer characteristics and determine pricing parameters. We
believe that this approach enables us to select acceptable risks and to tailor
our products, pricing and services to the specific needs of those customers.

  MAINTAIN FINANCIAL STRENGTH

     We believe that we are well capitalized and that our financial strength
creates a competitive advantage in retaining and attracting business. We are a
leading property and casualty insurance company in the United States. After
giving pro forma effect to the offerings, and the use of the proceeds from the
offerings, our corporate reorganization and related transactions, at December
31, 2001, we had total assets and shareholders' equity of $57.6 billion and $9.8
billion, respectively. We plan to maintain our sound financial position through
selective underwriting practices and a high quality investment portfolio.

  ENHANCE OUR POSITION AS A COST-EFFECTIVE PROVIDER OF PROPERTY AND CASUALTY
  INSURANCE

     We believe that a critical factor in our competitive advantage in the
property and casualty insurance industry is our success in controlling expense
ratios. Our statutory expense ratio was 3.8% lower than our peer group in 2000,
according to ISO Top 100 Insurer Financial Results. Low expense ratios combined
with superior risk selection and excellent execution allow for both competitive
pricing and appropriate underwriting returns. We believe that we have created a
highly cost and quality conscious culture among our employees.

  EMPHASIZE CUSTOMER-ORIENTED FOCUS

     We continue to provide new products and services within our core product
lines and markets to foster simpler, closer relationships with customers,
including agents, brokers and insureds. We have adopted an industry-specific
orientation within our Commercial Lines underwriting groups that allow us to
identify favorable individual account characteristics. We foster point-of-sale
transactions by shifting decision-making authority, within defined parameters,
to field underwriting and agency management representatives who interact
directly with agents, brokers and insureds. This process is linked with a strong
collaborative underwriting review culture in both our regional locations and our
home office. We also enhance customer relations by providing timely, responsive
pricing quotes and claims service.

  MANAGE DISTRIBUTION RELATIONSHIPS AND CAPITALIZE ON OUR BRAND NAME AND BROAD
  PRODUCT OFFERINGS

     We believe that a critical competitive advantage in the property and
casualty insurance industry is a loyal, high quality distribution network that
matches the insurer's products and services with the unique needs of their
customer. We maintain strong relationships with our distribution force,
including independent agents, selected small to medium-sized brokers having a
strong local or regional presence, and large national brokerage firms. As a
result of our recognized franchise and our broad array of insurance products and
services and specialized expertise, we are able to offer our agents and brokers
significant product expansion opportunities. In so doing, we believe that we are
well positioned to capture a greater percentage of business handled by well
established and growing agencies. Examples of product expansion opportunities
available to our distribution network include the comprehensive portfolio of
Bond, Gulf,

                                        55


marine, and our boiler and machinery products, which help agents and brokers
address the specialized risks of many traditional businesses.

  LEVERAGE TECHNOLOGY TO IMPROVE SERVICE AND ENHANCE OUR AGENCY DISTRIBUTION
  CHANNELS

     We have been a leading developer of technology-based solutions for the
insurance industry. These initiatives include a comprehensive array of online
service capabilities, such as our eBill service which allows customers to pay
bills and view bill history online, as well as online claims management
capabilities for National Accounts brokers and risk managers. Additionally, we
have been a leader in providing agents the ability to quote and issue policies
directly from their agencies by leveraging either their own agency management
systems or using our specially designed proprietary platforms. All of these
quote and issue platforms interface with our underwriting and rating systems.
The combination of these innovations provides an ease-of-doing-business
environment with our distribution force, which we believe is a significant
competitive advantage.

  ACTIVELY PARTICIPATE IN INDUSTRY CONSOLIDATION

     We have successfully acquired and integrated companies as a means to grow
our company. We believe that the pace of property and casualty industry
consolidation will accelerate, making acquisition opportunities increasingly
available. Our market presence and strong balance sheet and cash flow, together
with management's demonstrated experience, create an effective platform for our
participation in industry consolidation.

  UTILIZE SOPHISTICATED MODELING AND RAPID RESPONSE SYSTEMS TO MANAGE
  CATASTROPHIC EXPOSURE

     We actively manage our exposure to catastrophe losses. We control exposure
in high-risk areas through a variety of underwriting approaches, in many cases
subject to restrictions imposed by insurance regulatory authorities. We employ
sophisticated computer modeling techniques to analyze significant natural
catastrophe exposures. We rely upon this analysis to establish geographic limits
on policy writing by separate unit designed to maximize returns on catastrophe
exposed business. To effectively manage claims when a catastrophe strikes, we
have developed a state-of-the-art rapid response unit, complete with catastrophe
vans, which operate as fully equipped claim offices after an event.

  EMPLOY DEDICATED SPECIALISTS AND AGGRESSIVE RESOLUTION STRATEGIES TO MANAGE
   ENVIRONMENTAL AND ASBESTOS LOSS EXPOSURE

     Our environmental and asbestos claims are managed by a dedicated group of
professionals, working closely with members of senior management, which has
operated as a separate unit since 1986. We believe that this approach gives us
consistency in claims handling and policy coverage interpretation. Past
successes in these areas have been built upon the early identification of
exposures and aggressive resolution of coverage uncertainties.

OUR PRODUCTS AND SERVICES

  COMMERCIAL LINES

     We are the third largest writer of commercial lines insurance in the United
States based on 2000 direct written premiums as compiled and published by A.M.
Best. We believe this position provides us with significant advantages in terms
of brand recognition, relationships, critical mass, as well as the ability to
realize operating efficiencies. Our Commercial Lines segment offers a broad
array of property and casualty insurance and insurance-related services to our
clients. Commercial Lines is organized into the

                                        56


following five marketing and underwriting groups, each of which focuses on a
particular client base or product grouping to provide products and services that
specifically address clients' needs:

     - National Accounts provides large corporations with casualty products and
       services and includes our residual market business which offers workers'
       compensation products and services to the involuntary market;

     - Commercial Accounts provides property and casualty products to mid-sized
       businesses, property products to large businesses and boiler and
       machinery products to businesses of all sizes, and includes dedicated
       groups focused on the construction industry, trucking industry,
       agribusiness, and ocean and inland marine;

     - Select Accounts provides small businesses with property and casualty
       products, including packaged property and liability policies;

     - Bond provides a wide range of customers with specialty products built
       around our market leading surety bond business along with an expanding
       executive liability practice; and

     - Gulf serves all sizes of customers through specialty programs, with
       particular emphasis on management and professional liability products.

     In 2001, Commercial Lines generated net written premiums of approximately
$5.7 billion.

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

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



                                                                                     PERCENTAGE OF
                                                      TOTAL NET WRITTEN PREMIUMS       TOTAL NET
                                                     ----------------------------   WRITTEN PREMIUMS
                                                       YEAR ENDED DECEMBER 31,         YEAR ENDED
                                                     ----------------------------     DECEMBER 31,
                                                      2001     2000(A)     1999           2001
                                                     -------   --------   -------   ----------------
                                                        (DOLLARS IN MILLIONS)
                                                                        
NET WRITTEN PREMIUMS BY PRODUCT LINE:
  Commercial multi-peril...........................  $1,758     $1,644    $1,469          30.7%
  Workers' compensation............................   1,031      1,062     1,078          18.0
  Commercial automobile............................     914        778       724          16.0
  Property.........................................     834        640       509          14.6
  Fidelity and surety..............................     506        475       206           8.8
  General liability................................     683        431       422          11.9
                                                     ------     ------    ------         -----
     Total Commercial Lines........................  $5,726     $5,030    $4,408         100.0%
                                                     ======     ======    ======         =====
NET WRITTEN PREMIUMS BY MARKET:
  National Accounts................................  $  419     $  352    $  488           7.3%
  Commercial Accounts..............................   2,396      2,099     1,816          41.9
  Select Accounts..................................   1,713      1,575     1,494          29.9
  Bond.............................................     590        487       207          10.3
  Gulf.............................................     608        517       403          10.6
                                                     ------     ------    ------         -----
     Total Commercial Lines........................  $5,726     $5,030    $4,408         100.0%
                                                     ======     ======    ======         =====


---------------
(a) Includes a $131 million increase to net written premiums as a result of the
    acquisition of the Reliance Surety business.

                                        57


     Product Lines.  We write a broad range of commercial property and casualty
insurance for risks of all sizes. The core products in Commercial Lines are as
follows:

          Commercial Multi-Peril -- provides a combination of property and
     liability coverage typically for small businesses. Property insurance
     covers damages such as those caused by fire, wind, hail, water, theft and
     vandalism, and protects businesses from financial loss due to business
     interruption resulting from a covered loss. Liability coverage also insures
     businesses against third-party liability from accidents occurring on their
     premises or arising out of their operations, such as injuries sustained
     from products sold.

          Workers' Compensation -- provides coverage for employers for specified
     benefits payable under state or federal law for workplace injuries to
     employees. There are typically four types of benefits payable under
     workers' compensation policies: medical benefits, disability benefits,
     death benefits and vocational rehabilitation benefits. We emphasize managed
     care cost containment strategies, which involve employers, employees and
     care providers in a cooperative effort that focuses on the injured
     employee's early return to work, cost-effective quality care, and customer
     service in this market. We offer the following three types of workers'
     compensation products:

          - guaranteed cost insurance products, in which policy premium charges
            are fixed for the period of coverage and do not vary as a result of
            the insured's loss experience;

          - loss-sensitive insurance products, including large deductible plans
            and retrospectively rated policies, in which fees or premiums are
            adjusted based on actual loss experience of the insured during the
            policy period; and

          - service programs, which are generally sold to our National Accounts
            customers, where we receive fees rather than premiums for providing
            loss prevention, risk management, and claim and benefit
            administration services to organizations under service agreements.
            We also participate in state assigned risk pools servicing workers'
            compensation policies as a servicing carrier and pool participant.

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

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

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

          General Liability -- provides coverage for liability exposures
     including bodily injury and property damage arising from products sold and
     general business operations. Specialized liability policies may also
     include coverage for directors' and officers' liability arising in their
     official capacities, employment practices liability insurance, fiduciary
     liability for trustees and sponsors of pension, health and welfare, and
     other employee benefit plans, errors and omissions insurance for employees,
     agents, professionals

                                        58


     and others arising from acts or failures to act under specified
     circumstances, as well as umbrella and excess insurance.

     Principal Markets and Methods of Distribution.  We distribute our
commercial products through approximately 6,300 brokers and independent agencies
located throughout the United States that are serviced by approximately 80 field
offices and two customer service centers. In recent years, we have made
significant investments in enhanced technology utilizing state-of-the-art
Internet-based applications to provide real-time interface capabilities with our
independent agencies and brokers. We establish relationships with
well-established, independent insurance agencies and brokers. In selecting new
independent agencies and brokers to distribute our products, we consider each
agency's or broker's profitability, financial stability, staff experience and
strategic fit with our operating and marketing plans. Once an agency or broker
is appointed, we carefully monitor its performance.

          National Accounts -- National Accounts sells a variety of casualty
     products and services to large companies. National Accounts also includes
     our residual market business, which primarily offers workers' compensation
     products and services to the involuntary market. National Accounts clients
     generally select loss-sensitive products in connection with a large
     deductible or self-insured program and, to a lesser extent, a guaranteed
     cost or a retrospectively rated insurance policy. Clients are frequently
     national in scope and range in size from businesses with sales of
     approximately $10 million per year to the largest Fortune 2000
     corporations. Through a network of field offices, our underwriting
     specialists work closely with national and regional brokers to tailor
     insurance coverages to meet clients' needs. Workers' compensation accounted
     for approximately 71% of sales to National Accounts customers during 2001,
     based on gross written premiums and fee income.

          Our residual market business sells claims and policy management
     services to workers' compensation and automobile assigned risk plans and to
     self-insurance pools throughout the United States. We service approximately
     35% of the total workers' compensation assigned risk market. We are one of
     only two servicing carriers which operate nationally. Assigned risk plan
     contracts generated approximately $80 million in service fee income in
     2001.

          Commercial Accounts -- Commercial Accounts sells a broad range of
     property and casualty insurance products through a large network of
     independent agents and brokers. Commercial Accounts' casualty products
     target businesses with 75 to 1,000 employees, while its property and other
     related first party products target both large and mid-sized businesses. We
     offer a full line of products to our Commercial Accounts customers with an
     emphasis on guaranteed cost programs.

          We continue to develop new industry targeted programs on a national
     level. Our industry specific knowledge, coupled with a disciplined exposure
     analysis process involving loss and claim control, allows our field
     underwriters to select, price and tailor terms and conditions for the
     better managed companies in each of our industry segments.

          A key objective of Commercial Accounts is continued focus on first
     party lines which cover risks of loss to property of the insured. Beyond
     the traditional middle-market network, dedicated units exist to complement
     the middle market or specifically respond to the unique or unusual business
     client insurance needs. These units are:

          - boiler and machinery,

          - commercial agribusiness,

          - inland and ocean marine,

          - trucking industry, and

          - the national commercial property division, which underwrites large
            property schedules such as Fortune 1000 companies.

          Within Commercial Accounts, a construction unit exists with separately
     dedicated claims, engineering and underwriting expertise providing
     insurance and risk management targeted solely to the
                                        59


     construction industry. We offer predominantly casualty products to
     mid-sized contractors on a guaranteed cost basis, and loss responsive
     products to the larger contractor marketplace.

          Select Accounts -- Select Accounts is one of the leading providers of
     property casualty products to small businesses. It serves firms with one to
     75 employees. Products offered by Select Accounts are guaranteed cost
     policies, often a packaged product covering property and liability
     exposures. Products are sold through independent agents, who are often the
     same agents that sell our Commercial Accounts and Personal Lines products.

          Personnel in our field offices and other points of local service,
     which are located throughout the United States, work closely with agents to
     ensure a strong local presence in the marketplace. We offer our independent
     agents a small business system that helps them connect all aspects of sales
     and service through a comprehensive service platform. Select Accounts is an
     industry leader in its array of agency interface alternatives; more than
     85% of all its eligible business volume is processed by 4,000 agencies
     using its Issue Express systems, which allow agents to quote and issue
     policies from agency offices.

          We also provide our agents with a comprehensive selection of online
     service capabilities, packaged together in an easy-to-use agency service
     portal, including customer service, marketing and claim functionality; for
     example, online eBill services allow customers to pay bills and view
     billing history online. Also, approximately 2,100 of Select Accounts'
     agencies have chosen to take advantage of our state-of-the-industry direct
     service center that functions as an extension of an agency's customer
     service operations, offering a wide range of services, such as coverage and
     billing inquiry, policy changes, certificates of insurance, coverage
     counseling and audit processing with licensed service professionals and
     extended hours of operation.

          Select Accounts has established strict underwriting guidelines
     integrated with our local field office structures. The agents either submit
     applications to our field underwriting locations or service centers for
     underwriting review, quote, and issuance or they utilize one of our
     automated quote and issue systems. Automated transactions are edited by our
     systems and issued only if they conform to established underwriting
     guidelines. Exceptions are reviewed by company underwriters and
     retrospective agency audits are conducted on a systematic sampling basis.
     We use policy level management information to analyze and understand
     results and to identify problems and opportunities.

          Bond -- Bond underwrites and markets its products to national,
     mid-sized and small customers as well as individuals, and distributes them
     through both national and wholesale brokers, and retail agents and regional
     brokers throughout the United States. Bond, through a newly established
     Global Services segment, also underwrites and markets surety products to
     large international businesses in Canada, the European Union, Latin and
     South America, Asia, Australia and New Zealand. We believe that we have a
     competitive advantage with respect to many of these products based on our
     reputation for timely and consistent decision-making, underwriting,
     claim-handling abilities, industry expertise and strong producer and
     customer relationships founded on a nationwide network of underwriting,
     industry and claim experts as well as our ability to cross-sell our
     products to customers of both Commercial Lines and Personal Lines.

          Bond's range of products includes fidelity and surety bonds, excess
     SIPC, directors' and officers' liability insurance, errors and omissions
     insurance, professional liability insurance, employment practices liability
     insurance, fiduciary liability insurance, and other related coverages. In
     addition, we market blended products, which combine fidelity, employment
     practices liability insurance, directors' and officers' liability
     insurance, other related professional liability insurance and fiduciary
     liability insurance into one product with either individual or aggregate
     limits. The customer base ranges from large financial services companies
     and commercial entities to small businesses and individuals. Bond is
     organized into two broad product line groups: Surety and Executive
     Liability. Surety is organized around construction and commercial customer
     segments as well as a newly established Global Services segment. Executive
     Liability is organized around commercial and financial services customers.
                                        60


          On May 31, 2000, we completed our acquisition of the surety business
     of Reliance Group Holdings, Inc., or Reliance Surety. In connection with
     the acquisition, we entered into a reinsurance arrangement for pre-existing
     business. Accordingly, the results of operations and the assets and
     liabilities acquired from Reliance Surety are included in our financial
     statements beginning June 1, 2000.

          Gulf -- Gulf provides a diverse product and program portfolio of
     specialty insurance lines, with particular emphasis on management and
     professional liability. Products include various types of directors' and
     officers' insurance, fiduciary, and employment practices liability for all
     sectors of commercial companies and financial institutions. Errors and
     omissions coverages are provided for numerous professional exposures
     including architects and engineers, lawyers, accountants, insurance agents,
     mutual fund advisors and investment counselors. Gulf provides fidelity and
     commercial crime coverages for nearly all classes of business. Gulf also
     offers excess and umbrella coverages for various industries. In 2000, Gulf
     expanded its product offerings with the purchase of the renewal rights to
     Frontier Insurance Group, Inc.'s environmental and excess surplus lines
     casualty businesses.

     Pricing and Underwriting.  Pricing levels for property and casualty
insurance products by our Commercial Lines are generally developed based upon
the frequency and severity of estimated losses, the expenses of producing
business and managing claims, and a reasonable allowance for profit. We have a
disciplined approach to underwriting and risk management that emphasizes a
profit-orientation rather than a premium volume or market share-oriented
approach to underwriting.

     We have developed an underwriting and pricing methodology that incorporates
underwriting, claims, engineering, actuarial and product development disciplines
for particular industries. This approach is designed to maintain high quality
underwriting and pricing discipline. This approach utilizes proprietary data
gathered and analyzed by us with respect to our Commercial Lines business over
many years. The underwriters and engineers use this information to assess and
evaluate risks prior to quotation. This information provides specialized
knowledge about specific industry segments. This methodology enables us to
streamline our risk selection process and develop pricing parameters that will
not compromise our underwriting integrity.

     Select Accounts uses a process based on Standard Industrial Classification
codes to allow agents and field underwriting representatives to make
underwriting and pricing decisions within predetermined classifications, because
underwriting criteria and pricing tend to be more standardized for smaller
businesses.

     A significant portion of our Commercial Lines business is written with
large deductible insurance policies. Under some workers' compensation insurance
contracts with deductible features, we are obligated to pay the claimant the
full amount of the claim. We are subsequently reimbursed by the contractholder
for the deductible amount, and are subject to credit risk until such
reimbursement is made. At December 31, 2001, contractholder receivables and
payables on unpaid losses were each approximately $2.2 billion. Retrospectively
rated policies are primarily used in workers' compensation coverage. Although
the retrospectively rated feature of the policy substantially reduces insurance
risk for us, it does introduce credit risk to us. Receivables on unpaid losses
from holders of retrospectively rated policies totaled approximately $330
million at December 31, 2001. Significant collateral, primarily letters of
credit, surety bonds and, to a lesser extent, cash collateral, is generally
requested for large deductible plans and/or retrospectively rated policies that
provide for deferred collection of deductibles and/or ultimate premiums. The
amount of collateral requested is predicated upon the creditworthiness of the
customer and the nature of the insured risks. Commercial Lines continually
monitors the credit exposure on individual accounts and the adequacy of
collateral.

     We continually monitor our exposure to natural peril catastrophic losses
and attempt to mitigate such exposure. We use sophisticated computer modeling
techniques to analyze underwriting risks of business in hurricane- and
earthquake-prone areas. We rely upon this analysis to make underwriting
decisions designed to manage our exposure on catastrophe exposed business. See
"-- Reinsurance."

                                        61


     Geographic Distribution.  The following table shows the distribution of
Commercial Lines' direct written premiums for the states that accounted for the
majority of premium volume for the year ended December 31, 2001:



STATE                                                       % OF TOTAL
-----                                                       ----------
                                                         
New York................................................       12.1%
California..............................................       10.4
Texas...................................................        6.6
Massachusetts...........................................        5.5
Florida.................................................        4.8
Illinois................................................        4.7
New Jersey..............................................        4.2
Pennsylvania............................................        3.7
Connecticut.............................................        3.0
All Others(a)...........................................       45.0
                                                              -----
     Total..............................................      100.0%
                                                              =====


---------------
(a) No other single state accounted for 3.0% or more of the total direct written
    premiums written in 2001 by us.

  PERSONAL LINES

     Travelers wrote the nation's first automobile policy over 100 years ago.
Today, we are the second largest writer of personal lines insurance through
independent agents and the eighth largest writer of personal lines insurance
overall in the United States based on 2000 direct written premiums as compiled
and published by A.M. Best. We believe our brand recognition and customer and
agent relationships are strengthened by our size and operating efficiencies,
coupled with extensive underwriting, claims and actuarial experience. In 2001,
Personal Lines generated net written premiums of approximately $4.1 billion.

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

                           TOTAL NET WRITTEN PREMIUMS



                                                                                       PERCENTAGE
                                                                                           OF
                                                                                       TOTAL NET
                                                                                        WRITTEN
                                                                                        PREMIUMS
                                                          YEAR ENDED DECEMBER 31,      YEAR ENDED
                                                         --------------------------   DECEMBER 31,
                                                          2001     2000     1999(A)       2001
                                                         ------   -------   -------   ------------
                                                               (IN MILLIONS)
                                                                          
NET WRITTEN PREMIUMS BY PRODUCT LINE:
  Personal automobile..................................  $2,591   $2,366    $2,369        63.1%
  Homeowners and other.................................   1,517    1,447     1,436        36.9
                                                         ------   ------    ------       -----
     Total Personal Lines..............................  $4,108   $3,813    $3,805       100.0%
                                                         ======   ======    ======       =====


---------------
(a) The 1999 premiums include an adjustment associated with a cancelled
    reinsurance transaction, which increased net written premiums by $72
    million.

                                        62


     Product Lines.  We write most types of property and casualty insurance
covering personal risks. Personal Lines had approximately 5.4 million policies
in force at December 31, 2001. The primary coverages in Personal Lines are
personal automobile and homeowners insurance sold to individuals.

          Personal Automobile -- provides coverage for liability to others for
     both bodily injury and property damage and for physical damage to an
     insured's own vehicle from collision and various other perils. In addition,
     many states require policies to provide first-party personal injury
     protection, frequently referred to as no-fault coverage.

          Homeowners and Other -- provides protection against losses to
     dwellings and contents from a wide variety of perils, as well as coverage
     for liability arising from ownership or occupancy. We write homeowners
     insurance for dwellings, condominiums and rental property contents. We also
     write coverage for personal watercraft, personal articles such as jewelry,
     and umbrella liability protection.

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

                           TOTAL NET WRITTEN PREMIUMS



                                                                                      PERCENTAGE
                                                                                          OF
                                                                                      TOTAL NET
                                                                                       WRITTEN
                                                                                       PREMIUMS
                                                          YEAR ENDED DECEMBER 31,     YEAR ENDED
                                                         -------------------------   DECEMBER 31,
                                                          2001     2000    1999(A)       2001
                                                         ------   ------   -------   ------------
                                                               (IN MILLIONS)
                                                                         
NET WRITTEN PREMIUMS BY DISTRIBUTION CHANNEL:
  Independent agents...................................  $3,308   $3,028   $2,953        80.5%
  Additional distribution..............................     687      634      551        16.7
  Other................................................     113      151      301         2.8
                                                         ------   ------   ------       -----
     Total Personal Lines..............................  $4,108   $3,813   $3,805       100.0%
                                                         ======   ======   ======       =====


---------------
(a) The 1999 premiums include an adjustment associated with a cancelled
    reinsurance transaction, which increased net written premiums by $72
    million.

     Principal Markets and Methods of Distribution.  Insurance companies
generally market personal automobile and homeowners insurance through one of
three distribution systems: independent agents, exclusive agents or direct
writing. The independent agents usually represent several unrelated property and
casualty companies. Exclusive agents represent one company and generally sell a
number of products, including life insurance and annuities in addition to
property casualty products. In contrast, direct writing companies generally
operate by mail and telephone through sales representatives.

     The independent agency system has consistently controlled approximately
one-third of the personal lines market share since 1990 based on net written
premiums. The number of national companies writing personal lines with
independent agents has dropped significantly in the past 10 years. This,
combined with our financial and operational strength, makes us a more desirable
carrier with existing agencies.

     Our Personal Lines products are distributed primarily through approximately
7,600 independent agencies located throughout the United States, supported by
personnel in 12 marketing regions and six customer service centers. In selecting
new independent agencies to distribute our products, we consider each agency's
profitability, financial stability, staff experience and strategic fit with our
operating and marketing plans. While our principal markets for personal lines
insurance are in states along the East

                                        63


Coast, in the South and Texas, Personal Lines is expanding its geographical
presence across the United States.

     We are an industry leader in the technology alternatives we provide agents
to maximize their ease of doing business. Personal Lines agents quote and issue
90% of our Personal Lines policies directly from their agencies by leveraging
either their own agency management system or using our proprietary quote and
issuance systems which facilitate and make it possible for agents to rate, quote
and issue policies on line. All of these quote and issue platforms interface
with our underwriting and rating systems, which edit transactions for compliance
with our underwriting and pricing programs. Business processed by agents on
these platforms is subjected to consultative review by our in-house
underwriters. In the past year, we have introduced new Internet-based
proprietary systems and have transitioned approximately 60% of our new business
to these platforms. We also provide an industry-leading download that refreshes
the individual agency system databases of approximately 2,700 Travelers agents
each day with updated new and existing policy information.

     We are developing functionality to provide our agents with a comprehensive
array of online service capabilities packaged together in an easy-to-use agency
service portal, including customer service, marketing and claim functionality;
for example, online eBill services allow customers to pay bills and view billing
history online. Agencies can also choose to shift the on-going core service
responsibility for our customers to one of our four Customer Care Centers, where
we function as an extension of an agency's servicing operation by providing a
comprehensive array of direct customer service needs, including response to
billing and coverage inquiries, and policy changes. More than 1,000 agents take
advantage of this service alternative.

     Personal Lines operates three single state companies in Massachusetts, New
Jersey and Florida with products marketed virtually exclusively through
independent agents. These states represented 20.4% of Personal Lines direct
written premiums in 2001. The companies were established to manage difficult
automobile environments in Massachusetts and New Jersey and property catastrophe
exposure in Florida. Each company has dedicated resources in underwriting,
claim, finance, legal and service functions. The establishment of these separate
companies in these states limits the capital at risk.

     Personal Lines also markets through additional distribution channels,
including sponsoring organizations such as employers and consumer associations,
and joint marketing arrangements with other insurers. We handle the sales and
service for these programs either through a sponsoring independent agent or
through three of our call center locations. We are one of the leading providers
of personal lines products to members of affinity groups. A number of well-known
corporations endorse our product offerings to their employees primarily through
a payroll deduction payment process. We have significant relationships with the
majority of the American Automobile Association (AAA) clubs in the United States
and other affinity groups that endorse our tailored offerings to their members.
Since 1995, we have had a marketing agreement with GEICO to write the majority
of GEICO's homeowners business, and to receive referrals from GEICO for new
homeowners business. This agreement added historically profitable business and
helped to geographically diversify the homeowners line of business.

     Our expense management practices and sophisticated underwriting
segmentation allow us to offer a competitively priced product. In addition, we
are leveraging these strengths and our service capabilities including prompt and
efficient claims handling and a high level of automation, to expand the
geographic distribution of Personal Lines products through our independent
agents and additional distribution mechanisms.

     Pricing and Underwriting.  Pricing levels for property and casualty
insurance products by our Personal Lines are generally developed based upon the
frequency and severity of estimated losses, the expenses of producing business
and administering claims, and a reasonable allowance for profit. We have a
disciplined approach to underwriting and risk management that emphasizes a
profit orientation rather than a premium volume or market-share-oriented
approach.

                                        64


     We have developed a product management methodology that incorporates
underwriting, claims, actuarial and product development disciplines. This
approach is designed to maintain high quality underwriting and pricing
discipline. Proprietary data is gathered and analyzed with respect to our
Personal Lines business over many years. We use a variety of proprietary and
vendor produced risk differentiation to facilitate our underwriting
segmentation. These models use customer supplied and third-party data sources,
including credit bureau data. Our Personal Lines product managers establish
strict underwriting guidelines integrated with our filed pricing and rating
plans, which enables us to streamline our risk selection and pricing.

     Pricing for personal automobile insurance is driven by changes in the
frequency of claims and by inflation in the cost of automobile repairs, medical
care and litigation of liability claims. As a result, the profitability of the
business is largely dependent on promptly identifying and rectifying disparities
between premium levels and expected claim costs, and obtaining approval of the
state regulatory authorities for indicated rate changes.

     Pricing in the homeowners business is also driven by changes in the
frequency of claims and by inflation in building supplies, labor costs and
household possessions. Most homeowners policies offer, but do not require,
automatic increases in coverage to reflect growth in replacement costs and
property values. In addition to the normal risks associated with any multiple
peril coverage, the profitability and pricing of homeowners insurance is
affected by the incidence of natural disasters, particularly hurricanes, winter
storms, wind and hail, earthquakes and tornadoes. In order to reduce our
exposure to catastrophe losses, we have limited the writing of new homeowners
business and selectively non-renewed existing homeowners business in some
markets, tightened underwriting standards and implemented price increases in
some catastrophe-prone areas, and instituted deductibles in hurricane and wind
and hail prone areas. In California, we have an endorsement that reduces our
exposure to catastrophic earthquake claims by increasing the deductible and
limiting other policy coverages in the event of an earthquake loss. We use
computer modeling techniques to assess our level of exposure to loss in
hurricane and earthquake catastrophe-prone areas. Changes to methods of
marketing and underwriting in coastal areas of Florida and New York, and in
California are subject to state-imposed restrictions, which makes it more
difficult for an insurer to significantly reduce exposures.

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

     Independent agents either submit applications to our service centers for
underwriting review, quote, and issuance or they utilize one of our automated
quote and issue systems. Automated transactions are edited by our systems and
issued if they conform to established guidelines. Exceptions are reviewed by
underwriters in our business centers or agency managers. Retrospective audits
are conducted by business center underwriters and agency managers, on a
systematic sampling basis, across all of our independent agency generated
business. Each agent is assigned to a specific employee or team of employees
responsible for working with the agent on business plan development, marketing,
and overall growth and profitability. We use agency level management information
to analyze and understand results and to identify problems and opportunities.

     The Personal Lines products sold through additional marketing channels are
underwritten by our employees. Underwriters work with our management on business
plan development, marketing, and overall

                                        65


growth and profitability. Channel-specific production and claim information is
used to analyze results and identify problems and opportunities.

     Geographic Distribution.  The following table shows the distribution of
Personal Lines' direct written premiums for the states that accounted for the
majority of premium volume for the year ended December 31, 2001:



STATE                                                       % OF TOTAL
-----                                                       ----------
                                                         
New York..................................................     20.9%
Texas.....................................................      8.2
Massachusetts.............................................      7.7
Pennsylvania..............................................      7.3
New Jersey................................................      6.5
Florida...................................................      6.2
Connecticut...............................................      5.2
Georgia...................................................      4.3
Virginia..................................................      4.2
North Carolina............................................      3.3
All Others(a).............................................     26.2
                                                              -----
     Total................................................    100.0%
                                                              =====


---------------
(a) No other single state accounted for 3.0% or more of the total direct written
    premiums written in 2001 by us.

CLAIMS MANAGEMENT

     Our claims management strategy and philosophy and their execution are
critical to the success of our company, its operating results and to business
retention. Claim payout and expense represent a substantial portion of every
premium dollar we earn. Our strategy and philosophy are based on three core
tenets:

     - fast and efficient fact-based claims management ultimately lowers losses
       for our customers and us;

     - advanced technology allows us to put extensive information into the hands
       of our front-line claims professionals and enables local and, if needed,
       on-site claim resolution; and

     - specialization of personnel and segmentation of claims by complexity, as
       indicated by severity and causation, allow us to focus our resources
       effectively.

     We give our field claims management teams, located in 44 offices in 33
states, authority and resources to address the needs of local customers,
underwriters, agents and brokers across Commercial Lines and Personal Lines.
Additional claim staffs are dedicated to each of the Personal Lines single state
companies in Florida, Massachusetts and New Jersey as well as to the Commercial
Lines' Bond and Gulf markets. In addition, investigative, technical and legal
personnel work in specialized teams to better support similarly specialized
field operations. This structure permits us to maintain the economies of scale
of a larger, established company while enjoying the agility of a smaller company
that can quickly respond to the needs of our customers, underwriters, agents and
brokers. The home office provides additional support in the form of work flow
design, quality management, information technology, advanced trend analysis,
training, financial reporting and control, and human resources strategy.

     We employ claim adjusters, appraisers, investigators, staff attorneys,
system specialists and training, management and support personnel in the claim
department. Our employees manage over 90% of our claims. Approved external
service providers and vendors, such as adjusters, appraisers, investigators and
attorneys, are used primarily when the geographic location or other issues
raised by a claim warrant that use. To be approved, these vendors must have a
proven record and have demonstrated cost-consciousness and relevant technical
skills. When approved for use, these resources are closely managed.

                                        66


     Like the other functional specialties across Travelers, Claim Services uses
advanced data, management information and analysis to drive superior results at
all levels. This information assists us in reviewing our claim practices and
results to evaluate and improve our performance. Our claim strategy is based
primarily upon segmentation of claims, technical specialization, and speed of
resolution. Innovation is a key to our competitive advantage. In 1999, we
dedicated liability claim professionals to our construction market, pioneered
the use of digital and wireless technology and Internet-based claim notification
and expanded our "catastrophe van" fleet. Our proven catastrophe response
strategy and our newly created catastrophe liability and workers' compensation
claim handling teams were instrumental in our industry-leading response to the
terrorist attack on September 11th. In 2000, we expanded the dedication of
construction market claim handling to include workers' compensation claims and
invested significant additional resources in our Major Case organization. In
2001, we built TravGlass(SM), an Internet-based network of pre-approved and
customer or agent selected providers, to more effectively meet the automobile
glass repair needs of our Personal Lines customers.

     Another acknowledged strategic advantage is TravComp(SM), a workers'
compensation claim resolution and medical management program that assists
adjusters in promptly investigating, validating or rejecting workers'
compensation claims. Innovative medical and claims management technologies
permit nurse, medical and claims professionals to share vital information that
supports prompt investigation, effective return to work and resolution
strategies. These new technologies, together with better matching of
professional skills and authority to specific claim issues, have resulted in
workers' compensation cases closing faster and with lower medical, wage
replacement costs, and loss adjustment expenses. An integral part of our
strategy and our obligations to our customers and shareholders is our leadership
position in the continuing fight against insurance fraud.

     Environmental, asbestos and other cumulative injury claims are separately
managed by our special liability group. See "-- Environmental, Asbestos and
Other Cumulative Injury Claims."

REINSURANCE

     We reinsure a portion of the risks we underwrite in order to control our
exposure to losses, stabilize earnings and protect capital resources. We cede to
reinsurers a portion of these risks and pay premiums based upon the risk and
exposure of the policies subject to this reinsurance. Reinsurance involves
credit risk and is generally subject to aggregate loss limits. Although the
reinsurer is liable to us to the extent of the reinsurance ceded, we remain
liable as the direct insurer on all risks reinsured. Reinsurance recoverables
are reported after allowances for uncollectible amounts. We also hold
collateral, including escrow funds and letters of credit, under reinsurance
agreements. We monitor the financial condition of reinsurers on an ongoing
basis, and review our reinsurance arrangements periodically. Reinsurers are
selected based on their financial condition, business practices and the price of
their product offerings. For additional information concerning reinsurance, see
note 5 to our consolidated financial statements included in this prospectus.

     We utilize a variety of reinsurance agreements to control our exposure to
large property and casualty losses. We utilize the following types of
reinsurance:

     - facultative reinsurance, in which reinsurance is provided for all or a
       portion of the insurance provided by a single policy and each policy
       reinsured is separately negotiated;

     - treaty reinsurance, in which reinsurance is provided for a specified type
       or category of risks; and

     - catastrophe reinsurance, in which we are indemnified for an amount of
       loss in excess of a specified retention with respect to losses resulting
       from a catastrophic event.

                                        67


     The following presents our top five reinsurers, except Lloyd's of London
which is discussed in more detail below, by reinsurance recoverables at December
31, 2001 (in millions):



                                             REINSURANCE
REINSURER                                    RECOVERABLES    A.M. BEST RATING OF REINSURER
---------                                    ------------    -----------------------------
                                                       
American Re-Insurance Company..............      $706        A++     highest of 16 ratings
General Reinsurance Corporation............       639        A++     highest of 16 ratings
Employers Reinsurance Corporation..........       313        A++     highest of 16 ratings
Swiss Reinsurance America Corporation......       282        A++     highest of 16 ratings
Transatlantic Reinsurance Company..........       224        A++     highest of 16 ratings


     As of December 31, 2001, we had reinsurance recoverables from Lloyd's of
$624 million. In 1996, Lloyd's restructured its operations with respect to
claims for years prior to 1993 and reinsured these into Equitas Limited, which
is currently unrated. Approximately $248 million of our Lloyd's reinsurance
recoverables at December 31, 2001 relates to Equitas liabilities. The remaining
recoverables of $376 million are from the continuing market of Lloyd's, which is
rated A- (4th highest of 16 ratings) by A.M. Best.

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

     At December 31, 2001, we had $11.0 billion in reinsurance recoverables. Of
this amount, $2.1 billion is for mandatory pools and associations that relate
primarily to workers' compensation service business and have the obligation of
the participating insurance companies on a joint and several basis supporting
these cessions. Also, $2.4 billion is attributable to structured settlements
relating primarily to personal injury claims, for which we have purchased an
annuity and remain contingently liable in the event of a default by the company
issuing the annuity. Of the remaining $6.5 billion ceded to reinsurers at
December 31, 2001, $770 million is attributable to environmental, asbestos and
other cumulative injury claims and the remainder principally reflects
reinsurance in support of ongoing business. In addition, at December 31, 2001,
$599 million of reinsurance recoverables were collateralized by letters of
credit, trust agreements and escrow funds.

  CURRENT NET RETENTION POLICY

     The descriptions below relate to our reinsurance arrangements in effect
after January 1, 2002. For third-party liability, including automobile no-fault,
the reinsurance agreements used by Commercial Accounts limit the net retention
to a maximum of $8.2 million per insured, per occurrence and those used by
Select Accounts limit the net retention to a maximum of $6.4 million per
insured, per occurrence. National Accounts utilizes reinsurance to limit net
retained policy limits on third-party coverages to $6.0 million. Gulf utilizes
various reinsurance mechanisms and has limited its net retention to a maximum of
$5.5 million per risk for any line of business. For commercial property
insurance, there is a $7.5 million maximum retention per risk with 100%
reinsurance coverage for risks with higher limits. The reinsurance agreement in
place for workers' compensation policies written by Commercial Accounts,
National Accounts, Select Accounts, and some segments of the residual market
business within National Accounts and Gulf cover 75% of each loss between $10
million and $20 million. Personal Lines retains the first $5 million of umbrella
policies and purchases facultative reinsurance for limits over $5 million. For
personal property insurance, there is a $6 million maximum retention per risk.
For executive liability products such as errors and omissions liability,
directors' and officers' liability, employment practices liability and blended
insurance products, Bond generally retains from $2 million up to $5 million per
risk. For surety protection, Bond generally retains up to $29.7 million per
principal which may be increased based on the type of obligation and other
credit risk factors. We review our retention policy on an ongoing basis.

                                        68


  CATASTROPHE REINSURANCE

     We utilize reinsurance agreements with nonaffiliated reinsurers to control
our exposure to losses resulting from one occurrence. For the accumulation of
net property losses arising out of one occurrence, reinsurance agreements cover
67% of total losses between $450 million and $750 million. For multiple workers'
compensation losses arising from a single occurrence, reinsurance agreements
cover 100% of losses between $20 million and $250 million and, for workers'
compensation losses caused by property perils, reinsurance agreements cover 67%
of losses between $450 million and $750 million. We review our risk and
catastrophe coverages at least quarterly and make changes we deem appropriate.

  FLORIDA REINSURANCE FUND

     We also participate in the Florida Hurricane Catastrophe Fund, or FHCF,
which is a state-mandated catastrophe reinsurance fund that provides
reimbursement to insurers for a portion of their future catastrophic hurricane
losses. FHCF is primarily funded by premiums from insurance companies that write
residential property business in Florida and, if insufficient, assessments on
insurance companies that write other property and casualty insurance, excluding
workers' compensation. FHCF's resources are limited to these contributions and
to its borrowing capacity at the time of a significant catastrophe in Florida.
There can be no assurance that these resources will be sufficient to meet the
obligations of FHCF.

     Our recovery of less than contracted amounts from FHCF could have a
material adverse effect on our results of operations in the event of a
significant catastrophe in Florida. However, we believe that it is not likely
that such an event would have a material adverse effect on our financial
condition or liquidity.

RESERVES

     Property and casualty loss reserves are established to account for the
estimated ultimate unpaid costs of loss and loss adjustment expenses for claims
that have been reported but not yet settled and claims that have been incurred
but not reported. We establish reserves by major product line, coverage and
year.

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

     We derive estimates for unreported claims and development on reported
claims principally from actuarial analyses of historical patterns of loss
development by accident year for each type of exposure and market segment.
Similarly, we derive estimates of unpaid loss adjustment expenses principally
from actuarial analyses of historical development patterns of the relationship
of loss adjustment expenses to losses for each line of business and type of
exposure. For a description of our reserving methods for environmental and
asbestos claims, see "-- Environmental, Asbestos and Other Cumulative Injury
Claims."

  DISCOUNTING

     The liability for losses for some long-term disability payments under
workers' compensation insurance and workers' compensation excess insurance has
been discounted using a maximum interest rate of 5%. At December 31, 2001, 2000
and 1999, the combined amounts of discount on our balance sheets were $792
million, $800 million and $832 million, respectively.

     The table at the end of this section sets forth the year-end reserves from
1991 through 2001 and the subsequent changes in those reserves, presented on a
historical basis. Accordingly, the original estimates,
                                        69


cumulative amounts paid and reestimated reserves in the table for the years 1991
to 1995 have not been restated to reflect the acquisition of Aetna's property
and casualty insurance subsidiaries. Beginning in 1996, the table includes the
reserve activity of Aetna. The data in the table is presented in accordance with
reporting requirements of the Securities and Exchange Commission. Care must be
taken to avoid misinterpretation by those unfamiliar with this information or
familiar with other data commonly reported by the insurance industry. The
accompanying data is not accident year data, but rather a display of 1991 to
2001 year-end reserves and the subsequent changes in those reserves.

     For instance, the "cumulative deficiency or redundancy" shown in the
accompanying table for each year represents the aggregate amount by which
original estimates of reserves as of that year-end have changed in subsequent
years. Accordingly, the cumulative deficiency for a year relates only to
reserves at that year-end and those amounts are not additive. Expressed another
way, if the original reserves at the end of 1991 included $4 million for a loss
that is finally paid in 2001 for $5 million, the $1 million deficiency (the
excess of the actual payment of $5 million over the original estimate of $4
million) would be included in the cumulative deficiencies in each of the years
1991 to 2000 shown in the accompanying table.

  OTHER FACTORS

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

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

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

     The differences between the reserves for loss and loss adjustment expenses
shown in the accompanying table, which is prepared in accordance with accounting
principles generally accepted in the United States of America, and those
reported in our annual reports filed with state insurance departments, which are
prepared in accordance with statutory accounting practices, were $(17) million,
$9 million and $38 million for 2001, 2000 and 1999, respectively.

                                        70



                                                            YEAR ENDED DECEMBER 31,
                                 -----------------------------------------------------------------------------
                                 1991(a)   1992(a)   1993(a)   1994(a)   1995(a)   1996(b)   1997(b)   1998(b)
                                 -------   -------   -------   -------   -------   -------   -------   -------
                                                             (DOLLARS IN MILLIONS)
                                                                               
Reserves for Loss and Loss
  Adjustment Expense Originally
  Estimated:...................  $8,360    $8,955    $ 9,319   $ 9,712   $10,090   $21,816   $21,406   $20,763
Cumulative amounts paid as of
  One year later...............   1,869     2,005      1,706     1,595     1,521     3,704     4,025     4,159
  Two years later..............   3,161     3,199      2,843     2,631     2,809     6,600     6,882     6,879
  Three years later............   4,041     4,063      3,610     3,798     3,903     8,841     8,850     9,006
  Four years later.............   4,706     4,662      4,563     4,676     4,761    10,355    10,480
  Five years later.............   5,182     5,465      5,274     5,388     5,322    11,649
  Six years later..............   5,878     6,078      5,882     5,855     5,842
  Seven years later............   6,421     6,618      6,289     6,324
  Eight years later............   6,913     6,983      6,718
  Nine years later.............   7,250     7,383
  Ten years later..............   7,623
Reserves re-estimated as of
  One year later...............   8,362     9,058      9,270     9,486     9,848    21,345    21,083    20,521
  Two years later..............   8,637     9,139      9,234     9,310     9,785    21,160    20,697    20,172
  Three years later............   8,906     9,183      9,108     9,395     9,789    20,816    20,417    19,975
  Four years later.............   9,026     9,189      9,271     9,427     9,735    20,664    20,168
  Five years later.............   9,123     9,405      9,298     9,463     9,711    20,427
  Six years later..............   9,367     9,440      9,349     9,441     9,661
  Seven years later............   9,396     9,508      9,370     9,445
  Eight years later............   9,477     9,555      9,374
  Nine years later.............   9,537     9,569
  Ten years later..............   9,568
Cumulative deficiency
  (redundancy).................   1,208       614         55      (267)     (429)   (1,389)   (1,238)     (788)
Gross liability -- end of
  year.........................                      $14,638   $15,013   $15,213   $30,969   $30,138   $29,411
Reinsurance recoverables.......                        5,319     5,301     5,123     9,153     8,732     8,648
                                                     -------   -------   -------   -------   -------   -------
Net liability -- end of year...                      $ 9,319   $ 9,712   $10,090   $21,816   $21,406   $20,763
                                                     =======   =======   =======   =======   =======   =======
Gross reestimated
  liability -- latest..........                      $14,742   $15,029   $14,633   $29,411   $28,658   $28,573
Reestimated reinsurance
  Recoverables -- latest.......                        5,368     5,584     4,972     8,984     8,490     8,598
                                                     -------   -------   -------   -------   -------   -------
Net reestimated
  liability -- latest..........                      $ 9,374   $ 9,445   $ 9,661   $20,427   $20,168   $19,975
                                                     =======   =======   =======   =======   =======   =======
Gross cumulative deficiency
  (redundancy).................                      $   104   $    16   $  (580)  $(1,558)  $(1,480)  $  (838)
                                                     =======   =======   =======   =======   =======   =======


                                    YEAR ENDED DECEMBER 31,
                                 ------------------------------
                                 1999(b)   2000(b)    2001(c)
                                 -------   -------   ----------
                                     (DOLLARS IN MILLIONS)
                                            
Reserves for Loss and Loss
  Adjustment Expense Originally
  Estimated:...................  $19,983   $19,435    $20,197
Cumulative amounts paid as of
  One year later...............    4,082     4,374
  Two years later..............    6,957
  Three years later............
  Four years later.............
  Five years later.............
  Six years later..............
  Seven years later............
  Eight years later............
  Nine years later.............
  Ten years later..............
Reserves re-estimated as of
  One year later...............   19,736    19,394
  Two years later..............   19,600
  Three years later............
  Four years later.............
  Five years later.............
  Six years later..............
  Seven years later............
  Eight years later............
  Nine years later.............
  Ten years later..............
Cumulative deficiency
  (redundancy).................     (383)      (41)
Gross liability -- end of
  year.........................  $28,854   $28,312    $30,617
Reinsurance recoverables.......    8,871     8,877     10,420
                                 -------   -------    -------
Net liability -- end of year...  $19,983   $19,435    $20,197
                                 =======   =======    =======
Gross reestimated
  liability -- latest..........  $28,555   $28,630
Reestimated reinsurance
  Recoverables -- latest.......    8,955     9,236
                                 -------   -------
Net reestimated
  liability -- latest..........  $19,600   $19,394
                                 =======   =======
Gross cumulative deficiency
  (redundancy).................  $  (299)  $   318
                                 =======   =======


---------------
(a) Excludes Aetna P&C reserves which were acquired on April 2, 1996.
    Accordingly, the reserve development (net reserves for loss and loss
    adjustment expense recorded at the end of the year, as originally estimated,
    less net reserves reestimated as of subsequent years) relates only to losses
    recorded by us and does not include reserve development recorded by Aetna
    P&C.

(b) Includes Aetna P&C gross reserves of $16,775 million and net reserves of
    $11,752 million which were acquired on April 2, 1996 and subsequent
    development recorded by Aetna P&C.

(c) Includes reserves of The Northland Company and its subsidiaries and
    Associates Lloyds Insurance Company which were acquired on October 1, 2001
    by us from Citigroup. Also includes reserves of CitiCapital Insurance
    Company, formerly known as Associates Insurance Company, which was
    contributed to us by Citigroup on October 3, 2001. These reserves total $623
    million.

                                        71


STATUTORY COMBINED RATIO INFORMATION

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

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

                           STATUTORY COMBINED RATIOS



                                                                 YEAR ENDED DECEMBER 31,
                                                                -------------------------
                                                                2001      2000      1999
                                                                -----     -----     -----
                                                                           
Commercial Lines:
  Loss and LAE ratio........................................     83.4%     76.0%     77.9%
  Underwriting expense ratio................................     28.7      27.8      30.7
  Combined ratio before policyholder dividends..............    112.1(a)  103.8(b)  108.6(c)
  Combined ratio............................................    112.6     104.5     109.7
Personal Lines:
  Loss and LAE ratio........................................     77.0%     73.8%     70.0%
  Underwriting expense ratio................................     25.3      25.9      26.7
  Combined ratio............................................    102.3(a)   99.7      96.7(c)
Total Company:
  Loss and LAE ratio........................................     80.7%     75.1%     74.3%
  Underwriting expense ratio................................     27.3      27.0      28.8
  Combined ratio before policyholder dividends..............    108.0(a)  102.1(b)  103.1(c)
  Combined ratio............................................    108.3     102.5     103.7


---------------
(a) Includes the impact of the terrorist attack on September 11th. Excluding the
    impact of this event, the statutory combined ratio before policyholder
    dividends for Commercial Lines, Personal Lines and total company were 99.5%,
    100.7% and 100.0%, respectively.

(b) 2000 includes a $131 million adjustment associated with the acquisition of
    the Reliance Surety business. Excluding this transaction, the Commercial
    Lines combined ratio before policyholder dividends and total company
    combined ratio before policyholder dividends were 103.5% and 101.9%,
    respectively.

(c) Commercial Lines includes the treatment of the commutation of an asbestos
    liability to an insured. Excluding the commutation, the Commercial Lines
    combined ratio before policyholder dividends was 106.1%. Personal Lines
    includes an adjustment associated with the termination of a quota share
    reinsurance arrangement. Excluding the adjustment, the Personal Lines
    combined ratio was 96.5%. Excluding these items, total company combined
    ratio before policyholder dividends was 101.8%.

                                        72


ENVIRONMENTAL, ASBESTOS AND OTHER CUMULATIVE INJURY CLAIMS

     Environmental, asbestos and other cumulative injury claims are segregated
from other claims and are handled separately by our special liability group, a
separate unit staffed by dedicated legal, claim, finance and engineering
professionals. For additional information on environmental, asbestos and other
cumulative injury claims, see "Management's Discussion and Analysis of Financial
Conditions and Results of Operations."

INTERCOMPANY REINSURANCE POOLS

     Most of our insurance subsidiaries are members of intercompany property and
casualty reinsurance pooling arrangements. At December 31, 2001, the
intercompany pools were the Travelers Property Casualty pool and the Northland
pool. As of October 1, 2001, most of the Gulf companies were included in the
Travelers Property Casualty pool. The Northland companies were acquired from an
affiliate and they maintain their own reinsurance pool. Each of these
reinsurance pools permits the participating companies to rely on the capacity of
the entire pool rather than just on its own capital and surplus. Under the
arrangements of each reinsurance pool, the members share substantially all
insurance business that is written, with some exceptions for the Northland pool,
and allocate the combined premiums, losses and expenses. Travelers Casualty and
Surety Company of America, or Travelers C&S of America, does not participate in
either pool and is dedicated to the Bond business. The Personal Lines single
state companies are not included in any pool.

RATINGS

     The following table summarizes the current claims-paying and financial
strength ratings of our property casualty insurance pools, CitiCapital and
affiliates, Travelers C&S of America and some of our Personal Lines single state
companies, by A.M. Best, Fitch Ratings, Moody's and Standard & Poor's as of
December 31, 2001. The table also presents the position of each rating in the
applicable agency's rating scale.



                                                                                                STANDARD &
                                         A.M. BEST       FITCH RATINGS         MOODY'S            POOR'S
                                      ---------------    --------------    ---------------    ---------------
                                                                                  
Travelers Property Casualty
  pool(a)...........................  A++ (1st of 16)    AA (3rd of 24)    Aa2 (3rd of 21)    AA- (4th of 21)
Northland pool(b)...................   A+ (2nd of 16)    --                --                 --
CitiCapital and affiliates(c).......   A+ (2nd of 16)    --                --                 --
First Floridian Auto and Home Ins.
  Co................................  A   (3rd of 16)    AA (3rd of 24)    --                 --
First Trenton Indemnity Company.....  A   (3rd of 16)    AA (3rd of 24)    --                 --
The Premier Insurance Co. of MA.....  A   (3rd of 16)    AA (3rd of 24)    --                 --
Travelers C&S of America............  A++ (1st of 16)    AA (3rd of 24)    Aa2 (3rd of 21)    AA- (4th of 21)


---------------
(a) The Travelers Property Casualty pool consists of The Travelers Indemnity
    Company, Travelers Casualty and Surety Company, The Phoenix Insurance
    Company, The Standard Fire Insurance Company, Travelers Casualty and Surety
    Company of Illinois, Farmington Casualty Company, The Travelers Indemnity
    Company of Connecticut, The Automobile Insurance Company of Hartford,
    Connecticut, The Charter Oak Fire Insurance Company, The Travelers Indemnity
    Company of America, Travelers Commercial Casualty Company (formerly known as
    The Travelers Indemnity Company of Missouri), Travelers Casualty Company of
    Connecticut, Travelers Commercial Insurance Company, The Travelers Indemnity
    Company of Illinois, Travelers Property Casualty Insurance Company, TravCo
    Insurance Company, The Travelers Home and Marine Insurance Company,
    Travelers Personal Security Insurance Company, Travelers Property Casualty
    Insurance Company of Illinois, Travelers Excess and Surplus Lines Company,
    Gulf Insurance Company, Atlantic Insurance Company, Select Insurance Company
    and Gulf Underwriters Insurance Company.

(b) The Northland pool consists of Northland Insurance Company, Northfield
    Insurance Company, Northland Casualty Company, Mendota Insurance Company,
    Mendakota Insurance Company, American Equity Insurance Company, and American
    Equity Specialty Insurance Company.

(c) CitiCapital and affiliates consist of CitiCapital Insurance Company,
    Commercial Guaranty Insurance Company and Associates Lloyds Insurance
    Company. Commercial Guaranty Insurance Company and Associates Lloyds cede
    all of their business to CitiCapital Insurance Company. CitiCapital
    Insurance Company was formerly known as Associates Insurance Company.
                                        73


INVESTMENTS

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

     At December 31, 2001, the carrying value of our investment portfolio was
$32.6 billion, of which 88% was invested in fixed maturity investments and
short-term investments (of which 38% was invested in federal, state or municipal
government obligations), 1% in mortgage loans and real estate held for sale, 3%
in common stocks and other equity securities and 8% in other investments. The
average duration of the fixed maturity portfolio, including short-term
investments, was 5.7 years at that date. Non-investment grade securities totaled
approximately $1.7 billion, representing approximately 7% of our fixed maturity
investment portfolio as of December 31, 2001.

     The following table sets forth information regarding our investments. It
reflects the average amount of investments, net investment income earned and the
yield thereon. See note 4 to our consolidated financial statements for
information regarding our investment portfolio.



                                                                 YEAR ENDED DECEMBER 31,
                                                              -----------------------------
                                                               2001       2000       1999
                                                              -------    -------    -------
                                                                  (DOLLARS IN MILLIONS)
                                                                           
Average investments.........................................  $31,686    $30,299    $30,872
Net investment income.......................................  $ 2,034    $ 2,162    $ 2,093
Average yield(a)............................................     6.8%       7.5%       7.2%
Average tax equivalent yield(a).............................     7.7%       8.3%       8.0%


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

DERIVATIVES

     See note 13 to our consolidated financial statements for a discussion of
the policies and transactions related to our derivatives.

COMPETITION

     The property and casualty insurance industry is highly competitive in the
areas of price, service, product offerings, agent relationships and, in the case
of personal property and casualty business, method of distribution, i.e., use of
independent agents, exclusive agents and/or salaried employees. According to
A.M. Best, there are approximately 1,000 property casualty organizations in the
United States, comprised of approximately 2,500 property casualty companies. Of
those organizations, the top 150 accounted for approximately 90% of the
consolidated industry's total net written premiums in 2000. Several property and
casualty insurers writing commercial lines of business, including us, offer
products for alternative forms of risk protection in addition to traditional
insurance products. These products, including large deductible programs and
various forms of self-insurance that utilize captive insurance companies and
risk retention groups, have been instituted in reaction to the escalating cost
of insurance caused in part by increased costs from workers' compensation cases
and jury awards in third-party liability cases.

  COMMERCIAL LINES

     The insurance industry is represented in the commercial lines marketplace
by many insurance companies of varying size as well as other entities offering
risk alternatives such as self-insured retentions or captive programs. Market
competition works to set the price charged for insurance products and the level
of service provided within the insurance regulatory framework. Growth is driven
by a company's ability to provide insurance and services at a price that is
reasonable and acceptable to the customer. In

                                        74


addition, the marketplace is affected by available capacity of the insurance
industry as measured by policyholders' surplus. Surplus expands and contracts
primarily in conjunction with profit levels generated by the industry. Growth in
premium and service business is also measured by a company's ability to retain
existing customers and to attract new customers.

     The National Accounts market is highly competitive and its business is
typically written through national brokers and, to a lesser extent, regional
brokers. Insurance companies compete in this market based on price, product
offerings, claim and loss prevention services, managed care cost containment and
risk management information systems. National Accounts also offers a large
nationwide network of localized claim service centers which provide greater
flexibility in claims adjusting and allow us to more quickly respond to the
needs of our customers. Our residual market business also competes for state
contracts to provide claims and policy management services. These contracts,
which generally have three-year terms, are selected by state agencies through a
bid process based on the quality of service and price. We service approximately
35% of the total workers' compensation assigned risk market, making us one of
the largest servicing insurers in the industry.

     The Commercial Accounts market is highly competitive. Commercial Accounts
business has historically been written through independent agents and brokers,
although some companies use direct writing. Competitors in this market are
primarily national property casualty insurance companies willing to write most
classes of business using traditional products and pricing and, to a lesser
extent, regional insurance companies and companies that have developed niche
programs for specific industry segments. Companies compete on price, product
offerings, response time in policy issuance and claim and loss prevention
services. Additionally, reduced overhead and improved efficiency through
automation and response time to customer needs are key to success in this
market. The construction business has become a focused industry market for
several large insurance companies. Construction market business is written
through agents and brokers. Insurance companies compete in this market based
upon price, product offerings and claim and risk management service. We utilize
our specialized underwriters, engineers, and claim handlers, who have extensive
experience and knowledge of the construction industry, to work with customers,
agents and brokers to compete effectively in this market. We also utilize
dedicated units to tailor insurance programs to unique insurance needs. These
units are boiler and machinery, commercial agribusiness, inland and ocean
marine, trucking industry and national large commercial property.

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

     Bond competes in the highly competitive surety and executive liability
marketplaces. Bond's reputation for timely and consistent decision-making, a
nationwide network of local underwriting, claims and industry experts and strong
producer and customer relationships as well as its ability to offer its
customers a full range of financial services products, enable it to compete
effectively. Bond's ability to cross-sell its products to customers of
Commercial Lines and Personal Lines provides further competitive advantages for
us. Bond's focus is to manage individual and aggregate risk in this challenging
economic environment.

     The market in which Gulf competes includes small to mid-size niche
companies that target some lines of insurance and larger, multi-line companies
that focus on various segments of the specialty accounts market. Gulf's business
is generally written through wholesale brokers and retail agents and brokers

                                        75


throughout the United States. It derives a competitive advantage through its
underwriting practices, claim-handling expertise, low expense levels and broad
product offering base.

  PERSONAL LINES

     Personal lines insurance is written by hundreds of insurance companies of
varying sizes. Although national companies write the majority of the business,
we also face competition from local or regional companies which often have a
competitive advantage because of their knowledge of the local marketplace and
their relationship with local agents. We believe that the principal competitive
factors are price, service, perceived stability of the insurer and name
recognition. We also compete for business within each of the independent
agencies. These agencies also offer policies of competing independent agency
companies. At the agency level, we believe that competition is primarily based
on price and the level of service, including claims handling, as well as the
level of automation and the development of long-term relationships with
individual agents. We also compete with insurance companies that use captive
agents or salaried employees to sell their products. In addition to its
traditional independent agency distribution, Personal Lines has broadened its
distribution of Personal Lines products by marketing to sponsoring
organizations, including employee and affinity groups, and through joint
marketing arrangements with other insurers. We believe that our continued focus
on expense management practices and our underwriting segmentation abilities
enable us to price our products competitively in all of our distribution
channels.

REGULATION

  STATE REGULATION

     Our insurance subsidiaries are subject to regulation in the various states
and jurisdictions in which they transact business. The extent of regulation
varies, but generally derives from statutes that delegate regulatory,
supervisory and administrative authority to a department of insurance in each
state. The regulation, supervision and administration relate, among other
things, to standards of solvency that must be met and maintained, the licensing
of insurers and their agents, the nature of and limitations on investments,
premium rates, restrictions on the size of risks that may be insured under a
single policy, reserves and provisions for unearned premiums, losses and other
obligations, deposits of securities for the benefit of policyholders, approval
of policy forms and the regulation of market conduct, including the use of
credit information in underwriting as well as other underwriting and claims
practices. In addition, many states have enacted variations of competitive
rate-making laws, which allow insurers to set certain premium rates for certain
classes of insurance without having to obtain the prior approval of the state
insurance department. State insurance departments also conduct periodic
examinations of the affairs of insurance companies and require the filing of
annual and other reports relating to the financial condition of companies and
other matters. Financial examinations completed in the past three years have not
resulted in any adjustments to statutory surplus and pending financial and
market conduct examinations have not identified any material findings to date.
At the present time, our insurance subsidiaries are collectively licensed to
transact insurance business in all states, the District of Columbia, Guam,
Puerto Rico, Bermuda, and the U.S. Virgin Islands, as well as Canada and the
United Kingdom.

  INSURANCE HOLDING COMPANY STATUTES

     Although as a holding company, we are not regulated as an insurance
company, we own capital stock in insurance subsidiaries and therefore are
subject to state insurance holding company statutes, as well as certain other
laws, of each of the states of domicile of our insurance subsidiaries. All
holding company statutes, as well as other laws, require disclosure and, in some
instances, prior approval of material transactions between an insurance company
and an affiliate. The holding company statutes as well as other laws also
require, among other things, prior approval of an acquisition of control of a
domestic insurer, some transactions between affiliates and the payment of
extraordinary dividends or distributions.

                                        76


  INSURANCE REGULATION CONCERNING DIVIDENDS

     Our principal insurance subsidiaries are domiciled in the State of
Connecticut. The insurance holding company law of Connecticut applicable to our
subsidiaries requires notice to, and approval by, the state insurance
commissioner for the declaration or payment of any dividend that, together with
other distributions made within the preceding twelve months exceeds the greater
of 10% of the insurer's surplus as of the preceding December 31, or the
insurer's net income for the twelve-month period ending the preceding December
31, in each case determined in accordance with statutory accounting practices.
This declaration or payment is further limited by adjusted unassigned surplus,
as determined in accordance with statutory accounting practices. The insurance
holding company laws of other states in which our insurance subsidiaries are
domiciled generally contain similar, although in some instances somewhat more
restrictive, limitations on the payment of dividends. During 2002, a significant
portion of dividends from our insurance subsidiaries is likely to be subject to
approval from the Connecticut Insurance Department, depending upon the amount
and timing of the payments.

  ASSESSMENTS FOR GUARANTY FUNDS AND SECOND-INJURY FUNDS AND OTHER MANDATORY
POOLING ARRANGEMENTS

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

     Many states have laws that established second-injury funds to provide
compensation to injured employees for aggravation of a prior condition or
injury. Insurers writing workers' compensation in those states having
second-injury funds are subject to the laws creating the funds, including the
various funding mechanisms that those states have adopted to fund the
second-injury funds. Several of the states having larger second-injury funds
utilize a premium surcharge that effectively passes the cost of the fund to
policyholders. Other states assess the insurer based on paid losses and allow
the insurer to recoup the assessment through future premium rates.

     Our insurance subsidiaries are also required to participate in various
involuntary assigned risk pools, principally involving workers' compensation and
automobile insurance, which provide various insurance coverages to individuals
or other entities that otherwise are unable to purchase that coverage in the
voluntary market. Participation in these pools in most states is generally in
proportion to voluntary writings of related lines of business in that state. In
the event that a member of that pool becomes insolvent, the remaining members
assume an additional pro rata share of the liabilities of the pool. The
underwriting results of these pools traditionally have been unprofitable.
Combined earned premiums related to such pools and assigned risks for us were
$144 million, $117 million and $134 million in 2001, 2000 and 1999,
respectively. The related combined underwriting losses for us were $48 million,
$53 million and $20 million in 2001, 2000 and 1999, respectively.

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

  INSURANCE REGULATIONS CONCERNING CHANGE OF CONTROL

     Many state insurance regulatory laws intended primarily for the protection
of policyholders contain provisions that require advance approval by state
agencies of any change in control of an insurance company that is domiciled, or,
in some cases, having substantial business that it is deemed to be commercially
domiciled, in that state. We own, directly or indirectly, all of the shares of
stock of property
                                        77


and casualty insurance companies domiciled in the states of Arizona, California,
Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Massachusetts,
Minnesota, Missouri, New Jersey and Texas. "Control" is generally presumed to
exist through the ownership of 10% (5% in the case of Florida) or more of the
voting securities of a domestic insurance company or of any company that
controls a domestic insurance company. Any purchaser of shares of common stock
representing 10% (5% in the case of Florida) or more of the voting power of our
capital stock will be presumed to have acquired control of our domestic
insurance subsidiaries unless, following application by that purchaser in each
insurance subsidiary's state of domicile, the relevant insurance commissioner
determines otherwise.

     In addition to these filings, the laws of many states contain provisions
requiring pre-notification to state agencies prior to any change in control of a
non-domestic insurance company admitted to transact business in that state.
While these pre-notification statutes do not authorize the state agency to
disapprove the change of control, they do authorize issuance of cease and desist
orders with respect to the non-domestic insurer if it is determined that some
conditions, such as undue market concentration, would result from the
acquisition.

     Any future transactions that would constitute a change in control of any of
our insurer subsidiaries would generally require prior approval by the insurance
departments of the states in which our insurance subsidiaries are domiciled or
commercially domiciled and may require preacquisition notification in those
states that have adopted preacquisition notification provisions and in which
such insurance subsidiaries are admitted to transact business.

     One of our insurance subsidiaries is domiciled in the United Kingdom.
Insurers in the United Kingdom are subject to change of control restrictions in
the Insurance Companies Act of 1982 including approval of the Financial Services
Authority.

     Some of our other insurance subsidiaries are domiciled in, or authorized to
conduct insurance business in, Canada. Authorized insurers in Canada are subject
to change of control restrictions in Section 407 of the Insurance Companies Act,
including approval of the Office of the Superintendent of Financial
Institutions.

     These requirements may deter, delay or prevent transactions affecting the
control of or the ownership of common stock, including transactions that could
be advantageous to our shareholders.

  INSURANCE REGULATORY INFORMATION SYSTEM

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

     A ratio result falling outside the usual range of IRIS ratios is not
considered a failing result; rather, unusual values are viewed as part of the
regulatory early monitoring system. Furthermore, in some years, it may not be
unusual for financially sound companies to have several ratios with results
outside the usual ranges. Generally, an insurance company will become subject to
regulatory scrutiny if it falls outside the usual ranges of four or more of the
ratios. As published by the NAIC, 11% of the companies included in the IRIS
system have reported results outside the usual range on four or more ratios.

     In each of 2001, 2000 and 1999, some of our insurance subsidiaries have
been outside of the usual range of IRIS ratios. In 2001 and 2000, two of our
principal subsidiaries had ratios outside the usual ranges. In 2001, The
Travelers Indemnity Company had a liabilities to liquid asset ratio of 110%,
which exceeded the usual result of 105%. This resulted from The Travelers
Indemnity Company's acquisition of The Northland Company and the contribution of
CitiCapital Insurance Company and affiliates, because these entities are not
liquid assets for the purposes of calculating this ratio. Travelers Casualty and
Surety
                                        78


Company has an estimated current reserve deficiency to policyholders' surplus
ratio of 26% which exceeded the usual result of 25%. The two factors which
contributed to this result were the combining of the Travelers Property Casualty
and Gulf Insurance intercompany reinsurance pools in 2001 and the decline in
workers' compensation business volume in previous years. For 2000 Travelers
Casualty and Surety Company of America had a change in net writings that was
138%, compared to the usual range of 33% to (33%). Travelers Casualty and Surety
Company had a change in surplus ratio that was unusual (13%) compared to the
usual range of 50% to (10%). For 2000, the change in net writings ratio for the
Travelers Casualty and Surety Company of America was outside of the usual range
due to the acquisition of the surety business of Reliance Group Holdings, Inc.
by Travelers Casualty and Surety Company. Simultaneous with the recording of the
business acquired, Travelers Casualty and Surety Company recognized the effects
of the cross-business reinsurance agreement with Travelers Casualty and Surety
Company of America. Travelers Casualty and Surety Company capitalized and
nonadmitted costs to recognize the acquisition which, together with dividends
paid to TIGHI, caused the change in surplus ratio for Travelers Casualty and
Surety Company to be outside the usual range. For 1999, none of our principal
insurance subsidiaries had ratios outside the usual range.

     In all of these instances in prior years, regulators have been satisfied
upon follow-up that there is no problem. It is possible that similar events
could occur this year or in the future; management believes that the resolution
would be the same and no regulatory action is anticipated as a result of the
2001 IRIS ratio results. No regulatory action has been taken by any state
insurance department or the NAIC with respect to IRIS ratios of any of our
insurance subsidiaries for the years ended December 31, 2000 and 1999,
respectively.

  RISK-BASED CAPITAL (RBC) REQUIREMENTS

     In order to enhance the regulation of insurer solvency, the NAIC has
adopted a formula and model law to implement RBC requirements for most property
and casualty insurance companies, which is designed to determine minimum capital
requirements and to raise the level of protection that statutory surplus
provides for policyholder obligations. The RBC formula for property and casualty
insurance companies measures three major areas of risk facing property and
casualty insurers:

     - underwriting, which encompasses the risk of adverse loss developments and
       inadequate pricing;

     - declines in asset values arising from market and/or credit risk; and

     - off-balance sheet risk arising from adverse experience from
       non-controlled assets, guarantees for affiliates or other contingent
       liabilities and reserve and premium growth.

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

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

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     The formulas have not been designed to differentiate among adequately
capitalized companies that operate with higher levels of capital. Therefore, it
is inappropriate and ineffective to use the formulas to rate or to rank these
companies. At December 31, 2001, all of our property and casualty insurance
subsidiaries had total adjusted capital in excess of amounts requiring company
or regulatory action at any prescribed RBC action level.

  FEDERAL REGULATION

     Citigroup is a bank holding company subject to the provisions of the Bank
Holding Company Act of 1956 and is a Financial Holding Company under the
Gramm-Leach-Bliley Act of 1999 which eliminated many legal barriers to
affiliations among banks, insurers, securities firms and other financial
services providers.

     Although the federal government does not generally regulate the business of
insurance, other than flood insurance, federal initiatives often have an impact
on the insurance industry. The Gramm-Leach-Bliley Act may have the effect of
increasing competition in the insurance industry from other financial services
providers. Other provisions of the Gramm-Leach-Bliley Act address privacy,
uniform standards for the state licensing of insurance agents and conversion of
mutual insurers to stock insurers.

EMPLOYEES

     At December 31, 2001, we had 20,199 full-time and 752 part-time employees.
We believe that our employee relations are satisfactory. None of our employees
is subject to collective bargaining agreements.

PROPERTIES

     We currently lease our executive offices, which are comprised of 1,030,000
square feet of office space in Hartford, Connecticut, from Citigroup. We also
lease approximately 373,000 square feet of office space at CityPlace, located in
Hartford, Connecticut, under a sublease that expires in March 2004 with respect
to approximately 118,000 square feet and expires in October 2008 with respect to
the balance of the premises, 93,500 square feet at the 90 State House Square
complex in Hartford, Connecticut, and 79,400 square feet at the 50/58 State
House Square complex in Hartford, Connecticut. In addition, we lease 168 field
and claim offices totaling approximately 4,717,000 square feet throughout the
United States under leases or subleases with third parties. In addition, we
currently lease approximately 575,000 square feet at Connecticut River Plaza
pursuant to a lease expiring in August 2010. We are currently negotiating with
Citigroup for the assignment or allocation of all or a portion of the lease.
Approximately 440,000 square feet under this lease are subleased to a third
party.

     We have agreed to purchase the six buildings that comprise our headquarters
and various other properties from Citigroup for an aggregate purchase price of
approximately $68.2 million. We have also agreed to exchange office space with
other Citigroup affiliates and, as a result, will relocate our operations from
the office space at CityPlace to the six buildings which now comprise of
executive offices and assign the lease demising the CityPlace office space to
Citigroup. The completion date of the exchange is anticipated to occur by the
end of the first quarter of 2003.

     On September 1, 2001, we vacated the 50 Prospect Street complex in
Hartford, Connecticut in order to undertake a complete renovation thereof over
the next three years. Therefore, we have leased approximately 423,000 square
feet of office space in Hartford, Connecticut to temporarily house the displaced
operations.

     We believe our properties are adequate and suitable for our business as
presently conducted and are adequately maintained.

LEGAL PROCEEDINGS

     This section describes the major pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which we or our
subsidiaries are a party or to which any of our 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 our subsidiaries, dozens of other insurers and the

                                        80


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 currently 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.). We have vigorously defended all of these cases and intend to
continue doing so.


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


     We provided surety bonds to affiliates of JPMorgan Chase in connection with
performance obligations of two subsidiaries of Enron. We are in litigation
(JPMorgan Chase Bank v. Liberty Mutual Insurance Company, et al.) in New York
over whether we are obligated to perform under these bonds. In December 2001,
Enron filed for Chapter 11 bankruptcy protection and JPMorgan Chase made claims
against these bonds. The demand against us, based on our aggregate participation
in the bonds, is approximately $266 million before any reinsurance, recoveries
and taxes. In December 2001, all defendants filed answers and counterclaims to
the complaint, and on December 31, 2001, the plaintiff filed a motion for
summary judgment which was denied on March 5, 2002. We are vigorously defending
the lawsuit and we believe that we have meritorious defenses.

     We are increasingly becoming subject to more aggressive asbestos-related
litigation, and we expect this trend to continue. In October 2001, a purported
class action suit (Wise v. Travelers) was filed against us and other insurers in
state court in West Virginia alleging that our conduct violated the West
Virginia Unfair Trade Practice Act. The case seeks to reopen large numbers of
settled asbestos claims and to impose liability on insurers directly. The
complaint seeks damages, including punitive damages. In addition, in November
2001, we received notice under an administrative process of another purported
class action proceeding making similar allegations under Massachusetts insurance
law. The plaintiffs seek damages, including punitive damages.


     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 us as a defendant, alleging that we and other insurers
breached duties to asbestos product end users. Plaintiffs seek damages,
including punitive damages. These cases are scheduled for trial as early as
September 2002. Lawsuits based on similar allegations have been filed in courts
in Louisiana, Massachusetts and Texas.


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     In the ordinary course of business, our subsidiaries receive claims
asserting alleged injuries and damages from asbestos and other hazardous waste
and toxic substances and are subject to related coverage litigation. The
conditions surrounding the final resolution of these claims and the related
litigation continue to change. Currently, it is not possible to predict legal
and legislative changes and their impact on the future development of asbestos
and environmental claims and litigation. This development will be affected by
future court decisions and interpretations, as well as changes in applicable
legislation. Because of these future unknowns, additional liabilities may arise
for amounts in excess of the current related reserves. These additional amounts,
or a range of these additional amounts, cannot now be reasonably estimated.

     We are defending our environmental- and asbestos-related litigation
vigorously and believe that we have meritorious defenses. For a discussion of
the risks involved with this litigation, see "Risk Factors -- Our business could
be harmed because our potential exposure for asbestos claims and related
litigation is very difficult to predict" and "Risk Factors -- Our business could
be harmed because our potential exposure for environmental claims is very
difficult to predict."

     We are involved in numerous other lawsuits, other than asbestos and
environmental claims, arising mostly in the ordinary course of business
operations either as a liability insurer defending third-party claims brought
against insureds or as an insurer defending coverage claims brought against it.
In the opinion of our management, the ultimate resolution of these legal
proceedings would not be likely to have a material adverse effect on us.

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                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

     Set forth below are the names, ages and positions of our directors and
executive officers as of the date of this offering. Executive officers serve at
the pleasure of the board of directors.



NAME                                 AGE                             OFFICE
----                                 ---   -----------------------------------------------------------
                                     
Robert I. Lipp.....................  63    Chairman of the board of directors, chief executive officer
Charles J. Clarke..................  66    President and a director
Douglas G. Elliot..................  41    Chief operating officer and a director
Diana E. Beecher...................  56    Chief information officer
Peter N. Higgins...................  54    Executive vice president -- Underwriting
Joseph P. Kiernan..................  61    Executive vice president -- Bond
Brian MacLean......................  48    Executive vice president -- Claim Services
Joseph P. Lacher, Jr. .............  32    Executive vice president -- Personal Lines
Jay S. Benet.......................  49    Chief financial officer and a director
James M. Michener..................  49    General counsel, secretary
Douglas K. Russell.................  44    Chief accounting officer


     Set forth below is information concerning our directors and executive
officers as of the date of this prospectus.

     Robert I. Lipp is our chairman and chief executive officer and has been the
chairman and chief executive officer of TIGHI since December 18, 2001. Mr. Lipp
served as chairman of the board of TIGHI from 1996 to 2000 and from January 2001
to October 2001, and was the chief executive officer and president of TIGHI from
1996 to 1998. During 2000 he was a vice-chairman and member of the office of the
chairman of Citigroup. He was chairman and chief executive officer -- Global
Consumer Business of Citigroup from 1999 to 2000. From October 1998 to April
1999, he was co-chairman -- Global Consumer Business of Citigroup. From 1993 to
2000, he was our chairman and chief executive officer. From 1991 to 1998, he was
a vice-chairman and director of Travelers Group Inc. and from 1991 to 1993, he
was chairman and chief executive officer of CitiFinancial Credit Company. Prior
to joining Citigroup in 1986, Mr. Lipp spent 23 years with Chemical New York
Corporation. He is a member of the boards of Citigroup, Accenture Ltd. and
Carnegie Hall, president of the New York City Ballet, a trustee of the
Massachusetts Museum of Contemporary Art, a trustee of Williams College, and
Chairman of Dance-On Inc.

     Charles J. Clarke is our president and a member of our board of directors
and was chairman and chief executive officer of TIGHI just prior to December 18,
2001. Mr. Clarke had been our president from January 2001 to October 2001. Prior
to that time he had been our vice chairman from January 1998 to January 2001.
Mr. Clarke had been chief executive officer of Commercial Lines from January
1996 to January 1998 and was Chairman of Commercial Lines from 1990 to January
1996. He has held other executive and management positions with us for many
years, and he has been with us since 1958.

     Douglas G. Elliot is our chief operating officer and a member of our board
of directors and was president and chief operating officer of TIGHI just prior
to December 18, 2001. Mr. Elliot was president and chief executive officer from
October 2001 to December 2001. He was chief operating officer and president of
Commercial Lines from September 2000 to October 2001, chief operating officer of
Commercial Lines from August 1999 to September 2000 and senior vice president of
Select Accounts from June 1996 to August 1999. He has held other executive and
management positions with us for several years, and he has been with us since
1987.

     Diana E. Beecher is our chief information officer and has been chief
information officer of TIGHI since July 1997. Ms. Beecher joined our company in
1995 as vice president for technical engineering. Prior to joining our company,
Ms. Beecher served as senior vice president of brokerage operations for S.G.

                                        83


Warburg & Co., Inc. and previously spent 13 years with Morgan Stanley & Co.,
Inc., serving in various positions in the technology and equity divisions. Ms.
Beecher is a trustee of the Shippensburg University Foundation.

     Peter N. Higgins is our executive vice president -- Underwriting and chief
executive officer of our Commercial Accounts Group. Mr. Higgins has been our
chief underwriting officer since 2000 and chief executive officer of Commercial
Accounts since 1996. He has been employed in this position and other executive
and management positions with us or with our predecessors for several years, and
he has been with us since 1969.

     Joseph P. Kiernan is our executive vice president -- Bond and has been
TIGHI's president and executive vice president -- Bond since March 1996. From
1989 to March 1996, Mr. Kiernan was vice president of Aetna's bond business and
has worked in the bond business lines at Aetna since 1963. From June 1995 to
March 1996, Mr. Kiernan was vice president of standard Commercial Accounts of
Aetna.

     Brian MacLean is our executive vice president -- Claim Services. Mr.
MacLean served as president of Select Accounts from July 1999 to January 2002.
He was chief financial officer for Commercial Lines from June 1996 to July 1999.
Mr. MacLean was chief financial officer for Claim Services from March 1993 to
June 1996 and has served in several other positions with us since 1988.

     Joseph P. Lacher, Jr. is our executive vice president -- Personal Lines.
Prior to this position, Mr. Lacher served as senior vice president, product and
actuarial for Personal Lines since April 2001. Immediately prior to this Mr.
Lacher was Senior Vice President of Strategic Distribution for Personal Lines
from April 1999 to April 2001. From April 1996 to April 1999 Mr. Lacher was
chief financial officer Select Accounts. He has held other executive and
management positions with us for several years, and he has been with us since
1991.

     Jay S. Benet is our chief financial officer and a member of our board of
directors. Mr. Benet served from March 2001 to January 2002 as the worldwide
head of financial planning, analysis, and reporting for Citigroup. Mr. Benet
also served from April 2000 to March 2001 as chief financial officer for
Citigroup's Global Consumer Europe, Middle East and Africa region. Prior to
that, he served in various executive positions with Travelers Life & Annuity,
including chief financial officer and executive vice president, Group Annuity
from December 1998 to April 2000 and senior vice president Group Annuity from
December 1996 to December 1998. Prior to joining Travelers Life & Annuity in
1990, Mr. Benet was a partner of Coopers & Lybrand (now known as
PricewaterhouseCoopers) where he specialized in insurance.

     James M. Michener is our general counsel and secretary. From April 2001 to
January 2002, Mr. Michener served as general counsel of Citigroup's Emerging
Markets business. Prior to joining Citigroup's Emerging Markets business, Mr.
Michener was general counsel of Travelers Insurance from April 2000 to April
2001. He began his career as a lawyer with our company and held several
positions, including general counsel of the Managed Care and Employee Benefits
Division from March 1994 to December 1994. From January 1995 to October 1995,
Mr. Michener served as general counsel of The MetraHealth Companies, Inc. In May
1996, after the sale of MetraHealth to United Healthcare Corporation, Mr.
Michener rejoined our company as general counsel of TIGHI.

     Douglas K. Russell is our chief accounting officer and has been vice
president, controller and chief accounting officer of TIGHI since July 1999. Mr.
Russell has also served in several other positions at TIGHI since January 1997.
Prior to joining TIGHI, Mr. Russell was director of financial reporting of both
The MetraHealth Companies, Inc. from May 1995 to October 1995, and of United
Healthcare Corporation, from October 1995 to December 1996. From 1979 to May
1995, Mr. Russell served in several positions at Ernst & Young LLP.

COMPOSITION OF BOARD; CLASSES OF DIRECTORS

     Our board of directors currently consists of four persons. NYSE rules
require us to appoint at least two directors who are "independent," as defined
under the rules of the NYSE within 90 days following the completion of this
offering and an additional director who is "independent" within one year of the
offering. We intend to appoint three "independent" directors as soon as
possible, but in any event within the time
                                        84


period prescribed by the NYSE. Upon completion of this offering, our board of
directors will be divided into three classes, denominated as class I, class II
and class III. Members of each class will hold office for staggered three-year
terms. At each annual meeting of our shareholders beginning in 2003, the
successors to the directors whose term expires at that meeting will be elected
to serve until the third annual meeting after their election or until their
successor has been elected and qualified.

     Until Citigroup ceases to control at least a majority of the voting power
of the outstanding class B common stock, the prior written consent of Citigroup
will be required under our certificate of incorporation for any change in the
number of directors on our board of directors, the determination of the members
of the board, and the filling of newly created vacancies on the board.

COMMITTEES OF THE BOARD OF DIRECTORS

     The standing committees of the board of directors are:

     The executive committee, which acts on behalf of the board if a matter
requires board action before a meeting of the full board can be held except on
matters that, under Connecticut law, cannot be delegated to a committee of the
board of directors.

     The audit committee, which

     - reviews the audit plans and findings of the independent auditors and our
       internal audit and risk review staff, and the results of regulatory
       examinations and tracks management's corrective actions plans where
       necessary;

     - reviews our financial statements, including any significant financial
       items and/or changes in accounting policies, with our senior management
       and independent auditors;

     - reviews our risk and control issues, compliance programs, and significant
       tax and legal matters;

     - recommends to the board the annual appointment of independent auditors
       and evaluates their independence and performance; and

     - reviews our risk management processes.

The members of the committee have not yet been appointed. We intend to appoint
three or more "independent" directors, as defined under the rules of the NYSE,
as soon as practicable, but in any event within the time period prescribed by
the NYSE.

     The personnel, compensation and directors committee, which, among other
things, evaluates our efforts to maintain effective corporate governance
practices and identifies candidates for election to the board of directors. The
committee will consider candidates suggested by directors or shareholders.
Nominations from shareholders, properly submitted in writing to our secretary,
will be referred to the committee for consideration. The committee reviews the
compensation actions for senior management. The committee also approves
broad-based and incentive compensation plans.

     The committee will also administer our various incentive compensation
plans, including our 2002 stock incentive plan, our 2002 executive performance
plan and our 2002 compensation plan for non-employee directors, which we
collectively refer to as our compensation plans. The members of the committee
have not yet been determined. The initial members of the committee, or if
required, any subcommittee will be comprised so as to satisfy the requirements
of rules under Section 16 of the Securities Exchange Act of 1934, as amended,
and Section 162(m) of the Internal Revenue Code of 1986, as amended. The
committee will have the exclusive authority to grant options to purchase shares
of our common stock and to grant other stock-based awards, in accordance with
the terms of our incentive compensation plans, to Section 16(a) persons and
covered executives and to administer various other elements of our incentive
compensation plans covered by Section 162(m) of the Internal Revenue Code.

                                        85


COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

  COMPENSATION OF DIRECTORS

     Directors' compensation is determined by the board. We plan to pay outside
directors in common stock to assure that the directors have an ownership
interest aligned with other shareholders. Outside directors will receive an
annual retainer of $100,000, payable either 100% in common stock, or up to 50%
in cash to cover taxes and the remainder in common stock. A director may defer
receipt of his stock.

     Directors will receive no additional compensation for participation on
board committees. Additional compensation for special assignments will be
determined on a case-by-case basis.

     Directors who are our employees or employees of our affiliates do not
receive any compensation for their services as directors. Directors will also
receive an annual option grant of 5,000 shares.

                                        86


  EXECUTIVE COMPENSATION

     The following table sets forth the compensation paid or awarded to our
chief executive officers and to each of the persons who were the four most
highly compensated executive officers in 2001 who will be continuing as
executive officers following the completion of this offering. We refer to these
seven individuals as our "named officers."

                           SUMMARY COMPENSATION TABLE


                                                                                               LONG-TERM
                                              ANNUAL COMPENSATION (A)                     COMPENSATION AWARDS
                                      ----------------------------------------   -------------------------------------
                                                                                                            SECURITIES
                                                                                                            UNDERLYING
                                                                                 RESTRICTED   RESTRICTED    CITIGROUP
                                                                     OTHER         STOCK         STOCK        STOCK
                                                                     ANNUAL        AWARDS       AWARDS       OPTIONS
NAME AND PRINCIPAL POSITION AT                                    COMPENSATION    (TIGHI)     (CITIGROUP)   (NUMBER OF
DECEMBER 31, 2001               YEAR  SALARY ($)   BONUS(B) ($)      ($)(C)        ($)(D)       ($)(D)       SHARES)
------------------------------  ----  ----------   ------------   ------------   ----------   -----------   ----------
                                                                                       
Robert I. Lipp....              2001    22,728              0             0            --              0        5,000
  Chairman of the board         2000   800,000      5,200,000         5,653            --              0    1,994,461
  and chief executive           1999   600,000      3,600,004        86,893             0      1,866,660    1,406,419
  officer(f)
Charles J. Clarke...            2001   500,000        262,500         5,653            --        116,667       46,296
  President and a director(g)   2000   500,000        385,000         5,653            --        286,666      156,627
                                1999   500,000        310,028         5,653       126,648        126,649      142,129
Diana E. Beecher...             2001   321,667        225,000             0            --        100,000       40,026
  Chief information officer     2000   275,000        328,787             0            --        161,617       67,376
                                1999   225,000        322,558             0        68,305         68,284       12,210
Douglas G. Elliot...            2001   302,500        262,500             0            --        116,667       27,444
  Chief operating officer       2000   245,000        411,265             0            --        184,980      105,251
  and a director(h)             1999   215,833        381,095             0        79,287         79,251       29,768
Peter N. Higgins...             2001   264,583        236,250             0            --        105,000       19,444
  Executive vice president --   2000   250,000        316,257             0            --        144,990       67,723
  Underwriting                  1999   237,500        262,538             0        58,307         58,309       27,742
Joseph P. Kiernan...            2001   358,333        135,000             0            --         60,000       72,223
  Executive vice president --   2000   350,000        216,257             0            --        144,990       89,313
  Bond                          1999   350,000        235,009             0        76,660         76,662       49,471
Jay S. Fishman(i)...            2001   385,833             --       186,505            --                     112,913
                                2000   500,000      2,125,005       125,691            --      1,166,659      545,081
                                1999   400,000      1,550,047       121,824       433,326        433,294      355,023



                                 ALL OTHER
NAME AND PRINCIPAL POSITION AT  COMPENSATION
DECEMBER 31, 2001                  ($)(E)
------------------------------  ------------
                             
Robert I. Lipp....                183,666
  Chairman of the board             3,564
  and chief executive               1,098
  officer(f)
Charles J. Clarke...                6,858
  President and a director(g)       6,858
                                    1,098
Diana E. Beecher...                 2,322
  Chief information officer         2,311
                                      426
Douglas G. Elliot...                  540
  Chief operating officer             534
  and a director(h)                   120
Peter N. Higgins...                 1,240
  Executive vice president --       1,224
  Underwriting                        426
Joseph P. Kiernan...                3,564
  Executive vice president --       3,448
  Bond                                708
Jay S. Fishman(i)...                  641
                                      844
                                      264


---------------
NOTES TO SUMMARY COMPENSATION TABLE

 (a) Compensation deferred at the election of a named officer is included in the
     category, e.g., salary or bonus, and year in which it would otherwise have
     been reported had it not been deferred.

 (b) Restricted stock awards were made under the Citigroup capital accumulation
     program which we refer to as CAP.

 (c) For Messrs. Clarke and Fishman, represents an amount reimbursed for the
     payment of taxes; and for Mr. Fishman, includes $62,982 for use of company
     transportation.

 (d) Restricted stock awards granted in January 2001 with respect to the 2000
     compensation year were made in Citigroup common stock. Restricted stock
     awards granted in January 2000 with respect to the 1999 compensation year
     were made in both Citigroup common stock and TIGHI common stock. Restricted
     stock awards of Citigroup common stock were made under CAP and awards of
     TIGHI common stock were made under TIGHI's capital accumulation plan, or
     TIGHI CAP, which was eliminated in 2000 following our repurchase of all of
     TIGHI's outstanding common stock we did not already own. At that time,
     participants in TIGHI CAP were given the option of exchanging their shares
     of restricted TIGHI common stock for shares of restricted Citigroup common
     stock or shares in a fixed income fund. Under CAP, a recipient may not
     transfer restricted stock for three years after the award. If the recipient
     is still employed by TIGHI or an affiliate at the end of three years, the

                                        87


     restricted stock becomes fully vested and freely transferable, subject to
     the Citigroup stock ownership commitment. From the date of award, the
     recipient can vote the restricted stock and receives full dividends. Under
     the stock ownership commitment, Citigroup's directors and senior management
     have agreed to hold at least 75% of all Citigroup common stock owned by
     them on the date they agreed to the commitment and awarded to them in the
     future, subject to some minimum ownership requirements, for as long as they
     remain directors or members of senior management. The only exceptions to
     the stock ownership commitment are gifts to charity, limited estate
     planning transactions with family members, and transactions with Citigroup
     itself in connection with exercising options or paying withholding taxes
     under stock option and restricted or deferred stock plans.

     For officers participating in CAP for the periods shown, a portion of
     compensation is paid in restricted stock. Generally, awards of restricted
     stock under CAP are discounted 25% from market value to reflect
     restrictions on transfer. All of the named officers participate in the CAP
     program, with a portion of their bonus awarded in restricted stock. In
     accordance with the terms of the Citibuilder CAP program, each of Mr. Lipp,
     for 1999, and Mr. Fishman, for 1999 and 2000, received 25% of his
     respective annual compensation, salary and bonus, in restricted stock, and
     each of the other named officers received the percentages of annual
     compensation, salary and bonus, shown in the following table in restricted
     stock:



                                                        % IN RESTRICTED
ANNUAL COMPENSATION                                          STOCK
-------------------                                     ----------------
                                                     
up to $200,000........................................         10%
$200,001 to $400,000..................................         15%
$400,001 to $600,000..................................         20%
over $600,000.........................................         25%


    Mr. Lipp did not receive a CAP award in January 2001, for the year 2000.

    As of December 31, 2001 (excluding awards that vested in January 2002, but
    including awards made in February 2002), total holdings of restricted stock
    of Citigroup and the market value of these shares for the named officers
    were:



EXECUTIVE                                         SHARES   MARKET VALUE
---------                                         ------   ------------
                                                     
Mr. Clarke......................................  11,023     $556,446
Ms. Beecher.....................................   8,637     $436,004
Mr. Elliot......................................   7,974     $402,549
Mr. Kiernan.....................................   5,902     $297,949
Mr. Higgins.....................................   6,460     $326,104


    Mr. Lipp does not hold any restricted stock of Citigroup.

    The market price at December 31, 2001 was $50.48 per share of Citigroup
    common stock. All shares were awarded under CAP or TIGHI CAP.

 (e) With respect to Mr. Lipp, represents amounts paid and the value of certain
     benefits provided in consideration for his services to TIGHI as chairman of
     the board from January 2001 to October 2001; and for all other named
     officers, represents supplemental life insurance paid by TIGHI.

 (f) Mr. Lipp became chairman and chief executive officer of TIGHI on December
     18, 2001. His 2001 compensation is for the period from December 18, 2001 to
     December 31, 2001. Mr. Lipp served as chairman and chief executive officer
     of Citigroup's Global Consumer Business in 2000 and co-chairman of
     Citigroup's Global Consumer Business in 1999. 100% of Mr. Lipp's
     compensation during 1999 and 2000 was paid by Citigroup for services
     provided to Citigroup.

 (g) Mr. Clarke served as chairman and chief executive officer of TIGHI from
     October 15, 2001 to December 18, 2001.

                                        88


(h) As Mr. Elliot became an executive officer of TIGHI in December 1999, the
    compensation reported for him is for the full year 1999.

 (i) On October 15, 2001, Mr. Fishman resigned from his positions as chairman of
     the board and chief executive officer of TIGHI. We estimate that for 1999
     approximately 60% of Mr. Fishman's compensation was for services rendered
     to TIGHI and 40% was for services rendered to Citigroup. For 2000 and 2001,
     we estimate that approximately 45% of Mr. Fishman's compensation was for
     services rendered to TIGHI and 55% was for services rendered to Citigroup.

  STOCK OPTIONS GRANT TABLE

     The following table shows 2001 grants to the named officers of options to
purchase Citigroup common stock. All 2001 stock option grants, including reload
options, were made under the Citigroup 1999 Stock Incentive Plan. The value of
stock options depends upon a long-term increase in the market price of the
common stock: if the stock price does not increase, the options will be
worthless; if the stock price does increase, the increase will benefit all
shareholders.

     The table describes options as either "initial" or "reload." Unless
otherwise stated;

     - the per share exercise price of all options is the closing price on the
       NYSE on the trading day before the option grant; and

     - initial options generally vest in cumulative installments of 20% per year
       over a five year period and remain exercisable until the tenth
       anniversary of the grant; however, options granted in 2000 and 2001 began
       to vest in July of the year following the grant date rather than on the
       first anniversary of the grant date.

  RELOAD OPTIONS

     Under the reload program, option holders can use Citigroup common stock
they have owned for at least six months to pay the exercise price of their
options and have shares withheld for the payment of income taxes due on the
exercise. They then receive a new reload option to make up for the shares used.

     Reload options maintain the option holder's commitment to us by maintaining
as closely as possible the holder's net equity position -- the sum of shares
owned and shares subject to option.

     Citigroup's personnel, compensation and directors committee determines at
the time of grant whether an option may be exercised under the reload program,
and may amend the program guidelines at any time. For optionees who are eligible
to participate in the reload program, the issuance of a reload option is not a
new discretionary grant. Rather, the issuance results from rights that were
granted to the option holder as part of the initial option grant. The reload
option does not vest, i.e., become exercisable, for six months and expires on
the expiration date of the initial grant.

                                        89


                       OPTION GRANTS IN LAST FISCAL YEAR



                                                    % OF TOTAL
                                                      OPTIONS           EXERCISE
                                NUMBER OF             GRANTED              OR
                                 SHARES               TO ALL              BASE
                               UNDERLYING            CITIGROUP            PRICE                        GRANT DATE
                                 OPTIONS           EMPLOYEES IN          ($ PER        EXPIRATION       PRESENT
NAME                           GRANTED(a)              2001              SHARE)           DATE        VALUE($)(b)
----                        -----------------    -----------------    -------------    ----------    --------------
                            INITIAL    RELOAD    INITIAL    RELOAD
                            -------    ------    -------    ------
                                                                                
Robert I. Lipp............    5,000         0     .008%                 $53.1250         1/16/11     $       61,039
                            =======    ======     ====                                               ==============

Charles J. Clarke.........   20,000               .033                   53.1250         1/16/11            244,154
                                          330                .002%       55.4600         1/07/03              2,101
                                           59                   *        55.4600         2/13/02                376
                                        4,117                .030        53.5500        11/02/08             22,958
                                        8,345                .061        53.5500         2/26/04             46,535
                                        2,682                .020        53.5500         1/07/03             14,956
                                       10,763                .079        46.2500        11/02/08             45,917
                            -------    ------     ----       ----                                    --------------

Total                        20,000    26,296     .033       .192                                           376,997
                            =======    ======     ====       ====                                    ==============

Diana E. Beecher..........   15,000               .025                   53.1250         1/16/11            183,116
                                        2,594                .019        49.1500         7/23/07             14,237
                                        4,514                .033        49.1500        11/02/08             24,775
                                          632                .005        53.5500        11/02/08              3,524
                                        1,690                .012        53.5500         7/24/06              9,424
                                        3,161                .023        50.5600         7/22/08             16,516
                                        3,809                .028        50.5600         7/23/07             19,902
                                        1,899                .014        50.2200         7/24/06              9,839
                                        6,727                .049        46.2500        11/02/08             28,699
                            -------    ------     ----       ----                                    --------------

Total                        15,000    25,026     .025       .183                                           310,032
                            =======    ======     ====       ====                                    ==============

Douglas G. Elliot.........   20,000               .033                   53.1250         1/16/11            244,154
                                          717                .005        39.3000        10/27/05              2,772
                                        6,727                .049        46.2500        11/02/08             28,699
                            -------    ------     ----       ----                                    --------------

Total                        20,000     7,444     .033       .054                                           275,625
                            =======    ======     ====       ====                                    ==============

Peter N. Higgins..........   12,000               .020                   53.1250         1/16/11            146,493
                                          717                .005        39.3000        10/27/05              2,772
                                        6,727                .049        46.2500        11/02/08             28,699
                            -------    ------     ----       ----                                    --------------

Total                        12,000     7,444     .020       .054                                           177,964
                            =======    ======     ====       ====                                    ==============

Joseph P. Kiernan.........   15,000               .025                   53.1250         1/16/11            183,116
                                        2,713                .020        53.3750         7/24/06             16,817
                                       14,031                .103        53.3750        11/02/08             86,974
                                       10,417                .076        55.0000         4/23/07             67,464
                                        4,940                .036        54.8750         7/24/06             31,717
                                        1,402                .010        54.8750         4/23/07              9,002
                                          450                .003        55.8125         4/23/07              2,935
                                        5,066                .037        49.4200         4/23/07             27,949
                                        7,558                .055        51.1300         7/24/06             39,605
                                       10,646                .078        47.2700        11/02/08             45,647
                            -------    ------     ----       ----                                    --------------

Total                        15,000    57,223     .025       .418                                           511,226
                            =======    ======     ====       ====                                    ==============

Jay S. Fishman............  100,000                                      53.1250         1/16/11          1,220,771
                                       12,913     .164       .095        56.2000         4/27/01             84,108
                            -------    ------     ----       ----                                    --------------

Total                       100,000    12,913     .164       .095                                         1,304,879
                            =======    ======     ====       ====                                    ==============



---------------
* Less than .001%

NOTES TO OPTION GRANT TABLE

(a) The total options outstanding at the end of 2001 for each covered executive
    is shown as "Number of Shares Underlying Unexercised Options at 2001 Year
    End" in the table "Aggregated Option Exercises in Last Fiscal Year and
    Fiscal Year-End Option Values" below.

(b) The "Grant Date Present Value" numbers in the table were derived by
    application of a variation of the Black-Scholes option pricing model. The
    following assumptions were used in employing the model:

     - Stock price volatility was calculated using the weekly closing price of
       Citigroup common stock on the NYSE for the year before the option grant
       date.

                                        90


     - The risk-free interest rate for each option grant was the interpolated
       market yield on the date of grant on a Treasury bill with a term
       identical to the subject estimated option life, as reported by the
       Federal Reserve.

     - The dividend yield, based upon the actual annual dividend rate during
       2001, was assumed to be constant over the life of the option.

     - For reload options, which vest six months after the date of grant,
       exercise was assumed to occur approximately twelve months after the grant
       date, based on each individual's historical experience of the average
       period between the grant date and exercise date.

     - For options that vest at a rate of 20% per year, exercise was assumed to
       occur approximately three and one-half years after the date of grant,
       based on an estimate of the respective average period between the grant
       date and exercise date.

     - The values arrived at through the Black-Scholes model were discounted by
       18.75% to reflect the reduction in value, as measured by the estimated
       cost of protection, of the options due to the holding requirements of the
       stock ownership commitment by Citigroup senior management. For purposes
       of calculating the discount, a five-year holding period was assumed even
       though a particular executive may be a member of senior management for
       more or less than five years.

  OPTION EXERCISES TABLE

     The following table shows the aggregate number of shares underlying options
for Citigroup common stock exercised in 2001 and the value at year-end of
outstanding options for Citigroup common stock, whether or not exercisable.

   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
                                     VALUES



                                                                  NUMBER OF SHARES
                                                                     UNDERLYING                 VALUE OF UNEXERCISED
                                                                UNEXERCISED OPTIONS                 IN-THE-MONEY
                                SHARES                                AT 2001                     OPTIONS AT 2001
                               ACQUIRED         VALUE                 YEAR-END                     YEAR-END($)(c)
                                  ON          REALIZED      ----------------------------    ----------------------------
NAME                          EXERCISE(a)      ($)(b)       EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
----                          -----------    -----------    -----------    -------------    -----------    -------------
                                                                                         
Robert I. Lipp............      760,000      $23,547,860     1,422,253          5,000        $348,392       $        0
Charles J. Clarke.........       33,554          528,114       137,454         79,829          67,227        1,012,013
Diana E. Beecher..........       36,435          845,047        44,233         94,462         111,760        1,044,113
Douglas G. Elliot.........       11,500          273,762        42,488         94,160          69,478          964,388
Peter N. Higgins..........       11,500          273,762        33,880         58,854          23,203          799,387
Joseph P. Kiernan.........       84,155        2,083,601        74,723        104,070          50,510        1,381,948
Jay S. Fishman............       49,291          816,907             0              0               0                0


---------------
NOTES TO OPTION EXERCISES TABLE


(a) This column shows the number of shares underlying options exercised in 2001
    by the named officers. The actual number of shares of Citigroup common stock
    received by these individuals from options exercised in 2001, net of shares
    sold, used to cover the exercise price and withheld to pay income tax, was:




EXECUTIVE                                                     SHARES
---------                                                     ------
                                                           
Mr. Lipp..................................................         0
Mr. Clarke................................................     7,257
Ms. Beecher...............................................    11,409
Mr. Elliot................................................     4,056
Mr. Higgins...............................................     4,056
Mr. Kiernan...............................................    26,931
Mr. Fishman...............................................     9,183


(b) "Value Realized" is the difference between the exercise price and the market
    price on the exercise date, multiplied by the number of options exercised.
    "Value Realized" numbers do not necessarily
                                        91


    reflect what the executive might receive if he sells the shares acquired by
    the option exercise, since the market price of the shares at the time of
    sale may be higher or lower than the price on the exercise date of the
    option. All of the named officers have made the stock ownership commitment
    described above to hold at least 75% of their Citigroup stock while they are
    members of TIGHI senior management or the planning groups of some Citigroup
    business units.

(c) "Value of Unexercised In-the-Money Options" is the aggregate, calculated on
    a grant-by-grant basis, of the product of the number of unexercised options
    at the end of 2001 multiplied by the difference between the exercise price
    for the grant and the year-end market price, excluding grants for which the
    difference is equal to or less than zero.

RETIREMENT PLANS

     Our domestic employees are covered by the Citigroup pension plan. Effective
January 1, 2002, this plan provides a single benefit formula for most of the
covered population. Prior to January 1, 2002, different formulas applied
depending upon a given employee's specific employment history with Citigroup.
Employees become eligible to participate in the Citigroup pension plan after one
year of service, and benefits under the Citigroup pension plan generally vest
after 5 years of service. The normal form of benefit under the Citigroup pension
plan is a joint and survivor annuity, payable over the life of the participant
and spouse, for married participants, and a single life annuity, payable for the
participant's life only, for single participants. Other forms of payment are
also available.

     The Citigroup cash balance benefit is expressed in the form of a
hypothetical account balance. Benefit credits accrue annually at a rate between
1.5% and 6%; the rate increases with age and service. Interest credits are
applied annually to the prior year's balance; these credits are based on the
yield on 30-year Treasury bonds. Although the normal form of the benefit is an
annuity, the hypothetical account balance is also payable as a single lump sum.

     Messrs. Clarke and Higgins accrue benefits in accordance with a prior plan
formula. Under this formula, the benefit is generally equal to 2% of final
average salary over a five-year period for each year of service up to 25 years
plus two-thirds of 1% for each year of service over 25 years, up to a maximum of
15 additional years, less a portion of the primary Social Security amount, plus
adjustments for cost-of-living increases of up to 3% each year. Minimum benefit
provisions also apply under this plan formula.

     In addition, Citigroup's nonqualified programs have been frozen effective
January 1, 2002. No further cash balance benefits will be accrued under these
programs for most of the covered population. Prior to 2002, these nonqualified
programs provided retirement benefits for compensation in excess of the Internal
Revenue Code compensation limit which is $200,000 for 2002, or in respect of
benefits accrued in excess of the Internal Revenue Code benefit limit which is
$160,000 for 2002.

  NONQUALIFIED PENSION PLANS

     Effective January 1, 2002, Citigroup's nonqualified pension programs no
longer provide accruals for most employees covered by Citigroup's qualified
pension plan.

     Messrs. Clarke and Higgins continue to accrue nonqualified benefits under
the grandfathered formula described above. Compensation covered by the
nonqualified plan is limited to $300,000 which is equal to twice the 1994
Internal Revenue Code compensation limit without giving effect to any increases
for inflation after 1994, less amounts covered by the Citigroup qualified
pension plan. Prior to 1994, there was no limit on compensation covered for this
particular formula.

     In addition to these programs, there is a supplemental retirement plan that
provided additional pension benefits to some employees for service through the
end of 1993. Messrs. Lipp and Fishman participated in this program.

     As Mr. Lipp retired from Citigroup effective December 31, 2000, he is
currently receiving a benefit from this supplemental program, the amount is
included in the pension benefit shown in the table below.

                                        92


As Mr. Fishman was not vested in his supplemental benefit at the time his
employment with Citigroup terminated, that benefit was forfeited.

  ESTIMATED ANNUAL BENEFITS UNDER ALL PLANS

     The estimated annual benefit provided in total by all plans described
above, expressed in the form of a single life annuity, is as follows:



                                                    YEARS OF SERVICE         ESTIMATED ANNUAL
NAME                                            THROUGH DECEMBER 31, 2001         BENEFIT
----                                            -------------------------    -----------------
                                                                       
Mr. Lipp....................................          14                         $ 238,259(a)
Mr. Clarke..................................          44                           484,968(b)
Ms. Beecher.................................          6                             21,829
Mr. Elliot..................................          15                            88,197
Mr. Higgins.................................          32                           170,379
Mr. Kiernan.................................          4                             11,935(c)
Mr. Fishman.................................          13                               N/A(d)


---------------
(a) Amount shown includes his current annual benefit of $233,949, payable as a
    joint and 100% survivor annuity, in respect of service with Citigroup
    through December 31, 2001.

(b) In addition to retirement benefits under the old Travelers retirement plan,
    TIGHI pays a retirement allowance of up to 13 weeks of base salary, based
    upon age at retirement, to employees who attained age 50 on or before
    December 31, 1989. This additional benefit is available to Mr. Clarke.

(c) Mr. Kiernan is also currently receiving a benefit accrued with Aetna prior
    to Citigroup's acquisition of the Aetna property casualty business in April
    1996. Although that benefit is payable to Mr. Kiernan from Aetna, Citigroup
    retains liability for the nonqualified portion of that benefit which is
    subject to cost of living adjustments and is equal to $103,905 per year,
    payable as a joint and 50% survivor annuity.

(d) Mr. Fishman's entire benefit was distributed to him as a single lump sum in
    the amount of $233,702. Mr. Fishman retains no further pension entitlements
    with Citigroup.

     These estimates are based on the following assumptions:

     - the benefit is determined as of age 65 or current age if older;

     - covered compensation for each covered executive remains constant at 2001
       levels;

     - regulatory limits on compensation and benefits, and the Social Security
       Wage Base remain constant at 2002 levels;

     - the interest credit rate for cash balance benefits for 2002 at 5.5%
       remains constant; and

     - the interest rate used to convert hypothetical account balances to annual
       annuities for 2002 at 5.5% remains constant.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     As of the initial public offering, all of the members of our board of
directors are also executive officers.

STOCK OPTION PLANS

  2002 STOCK INCENTIVE PLAN


     General.  Our board of directors and shareholder have recently approved the
2002 stock incentive plan. The 2002 stock incentive plan provides for the
issuance of stock-based and stock-denominated awards to our participating
subsidiaries' officers, employees, non-employee directors and agents. These


                                        93


awards include nonqualified stock options, reload options, incentive stock
options, stock appreciation rights, restricted stock, deferred stock, stock
units and other stock-based or stock-denominated awards. Participants in the
2002 stock incentive plan are not required to make any payments to us or our
relevant subsidiary as consideration for the granting of an award.

     Administration.  Awards will be granted by the personnel, compensation and
directors committee of our board of directors. The number of employees selected
to receive awards will likely vary from year to year.

     The committee will have the authority to determine timing of awards, to
select the employees to receive awards and to determine all the terms of each
award, including, among other things, any modifications of the award, applicable
restrictions, termination and vesting conditions.

     Eligibility.  Awards under the 2002 stock incentive plan may be granted to
our participating subsidiaries' officers, employees, non-employee directors and
agents. Awards under the 2002 stock incentive plan may also include:


     - that portion of bonuses payable to our executive officers under our
       executive performance compensation plan in the form of stock awards, and



     - that portion of stock-based compensation payable to our non-employee
       directors under our compensation plan for non-employee directors.


     Number of Shares Available for Issuance.  We may issue a maximum of 160
million shares of our common stock to participants under the 2002 stock
incentive plan which include the number of shares which may be necessary to
implement the substitution of equity awards based on our common stock for
outstanding equity awards that are based on Citigroup common stock as discussed
below. Common stock issued under the 2002 stock incentive plan may consist of
either class A common stock or class B common stock and may consist of shares
that are authorized but unissued, or previously issued shares reacquired by us,
or both. If an award is canceled, terminated or expires prior to the issuance of
shares to the participant, the shares of common stock underlying that award will
be available for future grants under the 2002 stock incentive plan.
Previously-owned shares that are used by a participant to pay the exercise price
of an award and shares used to pay withholding taxes will not be counted towards
the maximum number of shares available for issuance under the plan.

     Limitations of Number of Shares Granted; Adjustments.  The total number of
shares of common stock that we may grant to any one individual under
nonqualified stock options, incentive stock options and/or stock appreciation
rights we grant under the 2002 stock incentive plan, including reload options,
may not exceed 20 million shares. If the committee determines that a stock
split, dividend, distribution, recapitalization, merger, consolidation or
similar event equitably requires an adjustment, the committee may make equitable
adjustments to:

     - the maximum number of shares available for issuance under the 2002 stock
       incentive plan or to any one employee;

     - the maximum number of shares which may be granted as incentive stock
       options;

     - the number of shares of common stock covered by outstanding awards; and

     - the exercise price applicable to outstanding options, incentive stock
       options and stock appreciation rights.

However, the committee may not amend an outstanding award to an individual for
the sole purpose of reducing the exercise price under that award.

     Exercise Price and Payment of Exercise Price.  The committee will determine
the exercise price applicable to each option, incentive stock option and stock
appreciation right, which, except in the case of options issued in substitution
for options based on Citigroup common stock as discussed below, will not be less
than the fair market value of the common stock at the time of the grant. Upon
the exercise of an

                                        94


option, the participant may pay the exercise price in cash or, if permitted by
the committee, by using common stock acquired at least six months prior to the
exercise, having a fair market value equal to the exercise price, by a
combination of cash and common stock or by authorizing us to sell, on behalf of
the participant, all or a portion of the shares otherwise issuable upon
exercise, with the sale proceeds applied towards the exercise price. If a
participant uses shares of common stock to pay the exercise price, the
participant may be eligible for the grant of a reload option, as described
below.

     Reload Options.  A reload option gives the participant the right to
purchase a number of shares of common stock equal to the number of shares of
common stock used to pay the exercise price and the withholding taxes applicable
to an option exercise. Reload options do not increase the net equity position of
a participant. Their purpose is to facilitate continued ownership of our common
stock by participants. Upon the exercise of an option granted under the 2002
stock incentive plan or under any other designated stock plan, including but not
limited to any plan assumed by us or any successor plans, the participant, at
the discretion of the committee, may receive a reload option. The committee will
determine all the terms of reload options, provided that the exercise price will
not be less than the fair market value of the common stock at the time of grant.

     Change of Control.  Upon a "change of control," the committee, may, in its
discretion, accelerate, purchase, adjust or modify awards or cause the awards to
be assumed by the surviving corporation in a corporate transaction. A "change of
control" means the occurrence of any of the following:

     - any "person," within the meaning of Sections 13(d) and 14(d) of the
       Exchange Act, other than Citigroup, becomes the beneficial owner, within
       the meaning of Rule 13d-3 under the Exchange Act, of shares of our stock
       having 25% or more of the total number of votes that may be cast for
       election of our directors;

     - there occurs a change in the composition of the board of directors such
       that a majority of the board of directors do not consist of directors who
       either were directors prior to the change, or whose election was approved
       by the incumbent board;

     - a merger unless our shareholders immediately prior to the merger
       constitute at least a majority of the shareholders of the entity
       surviving the merger; or

     - a sale of all or substantially all of our assets or approval by our
       shareholders of a plan of liquidation.

     Additional Cancellation Provisions.  Awards granted under the 2002 stock
incentive plan are subject to cancellation if, after a termination of
employment, the participant engages in activities which are materially injurious
to us or in competition with our business.

     Transferability; Deferrals.  The committee may permit participants to
transfer some awards and, during any period of restriction on transferability,
shares issued as a result of an option exercise, to an immediate family member
or a trust for the benefit of a participant's immediate family members.
Otherwise, awards granted under the 2002 stock incentive plan will not be
transferable other than by will or by the laws of descent and distribution. The
committee may postpone the exercise of options, incentive stock options and
stock appreciation rights, or the issuance or delivery of common stock or cash
under any award for a given period and upon the terms and conditions as the
committee determines. In addition, the committee may determine that all or a
portion of a payment to a participant, whether in cash, shares of common stock
or a combination of cash and shares, will be deferred in order to avoid tax
results adverse to us.

     Tax Consequences.  The following is a brief summary of the principal United
States federal income tax consequences of transactions under the 2002 incentive
plan, based on current United States federal income tax laws. This summary is
not intended to be exhaustive, does not constitute tax advice and, among other
things, does not describe state, local or foreign tax consequences.

     Non-Qualified Options.  No taxable income is realized by a participant upon
the grant of an option, including a reload option. Upon the exercise of an
option, the participant will recognize ordinary
                                        95


compensation income in an amount equal to the excess, if any, of the fair market
value of the shares of common stock exercised over the aggregate option exercise
price, even though that common stock may be subject to a restriction on
transferability or may be subsequently forfeited, in limited circumstances.
Income and payroll taxes are required to be withheld by the participant's
employer on the amount of ordinary income resulting to the participant from the
exercise of an option. The spread is generally deductible by the participant's
employer for federal income tax purposes, subject to the possible limitations on
deductibility of compensation paid to some executives under Section 162(m) of
the Code. The participant's tax basis in shares of common stock acquired by
exercise of an option will be equal to the exercise price plus the amount
taxable as ordinary income to the participant.

     Upon a sale of the shares of common stock received by the participant upon
exercise of the option, any gain or loss will generally be treated for federal
income tax purposes as long-term or short-term capital gain or loss, depending
upon the holding period of that stock. The participant's holding period for
shares acquired after the exercise of an option begins on the date of exercise
of that option.

     If the participant pays the exercise price in full or in part by using
shares of previously acquired common stock, the exercise will not affect the tax
treatment described above and no gain or loss generally will be recognized to
the participant with respect to the previously acquired shares. The shares
received upon exercise which are equal in number to the previously acquired
shares used will have the same tax basis as the previously acquired shares
surrendered to us, and will have a holding period for determining capital gain
or loss that includes the holding period of the shares used. The value of the
remaining shares received by the participant will be taxable to the participant
as compensation, even though those shares may be subject to sale restrictions.
The remaining shares will have a tax basis equal to the fair market value
recognized by the participant as compensation income and the holding period will
commence on the exercise date. Shares used to pay applicable income and payroll
taxes arising from that exercise will generate taxable income or loss equal to
the difference between the tax basis of those shares and the amount of income
and payroll taxes satisfied with those shares. The income or loss will be
treated as long-term or short-term capital gain or loss depending on the holding
period of the shares used. Where the shares used to pay applicable income and
payroll taxes arising from that exercise generate a loss equal to the difference
between the tax basis of those shares and the amount of income and payroll taxes
satisfied with those shares, that loss may not be currently recognizable if,
within a period beginning 30 days before the exercise date and ending 30 days
after that date, the participant acquires or enters into a contract or option,
including a reload option, to acquire additional common stock.

     Incentive Stock Options.  No taxable income is realized by a participant
upon the grant or exercise of an incentive stock option. If shares of common
stock are issued to a participant after the exercise of an incentive stock
option and if no disqualifying disposition of those shares is made by that
participant within two years after the date of grant or within one year after
the receipt of those shares by that participant, then

     - upon the sale of those shares, any amount realized in excess of the
       option exercise price will be taxed to that participant as a long-term
       capital gain, and

     - we will be allowed no deduction.

     Additionally, the exercise of an incentive stock option will give rise to
an item of tax preference that may result in alternative minimum tax liability
for the participant.

     If shares of common stock acquired upon the exercise of an incentive stock
option are disposed of prior to the expiration of either holding period
described above, that disposition would be a "disqualifying disposition," and
generally

     - the participant will realize ordinary income in the year of disposition
       in an amount equal to the excess, if any, of the fair market value of the
       shares on the date of exercise, or, if less, the amount realized on the
       disposition of the shares, over the option exercise price, and

     - we will be entitled to deduct that amount.

                                        96


     Any other gain realized by the participant on that disposition will be
taxed as short-term or long-term capital gain, and will not result in any
deduction to us. If a participant pays the exercise price in full or in part
with previously acquired shares of common stock, the exchange will not affect
the tax treatment of the exercise. Upon the exchange, no gain or loss generally
will be recognized upon the delivery of the previously acquired shares to us,
and the shares issued in replacement of the shares used to pay the exercise
price will have the same basis and holding period for capital gain purposes as
the previously acquired shares. A participant, however, would not be able to
utilize the holding period for the previously acquired shares for purposes of
satisfying the incentive stock option statutory holding period requirements.
Additional shares of common stock will have a basis of zero and a holding period
that commences on the date the common stock is issued to the participant upon
exercise of the incentive stock option. If this exercise is effected using
shares of common stock previously acquired through the exercise of an incentive
stock option, the exchange of the previously acquired shares may be a
disqualifying disposition of that common stock if the holding periods discussed
above have not been met.

     If an incentive stock option is exercised at a time when it no longer
qualifies as an incentive stock option, the option will be treated as a
nonqualified option. Subject to some exceptions for disability or death, an
incentive stock option generally will not be eligible for the federal income tax
treatment described above if it is exercised more than three months following a
termination of employment.

     Stock Appreciation Rights.  Upon the exercise of a stock appreciation
right, the participant will recognize compensation income, in an amount equal to
the cash received plus the fair market value of the common stock received from
the exercise. The participant's tax basis in the shares of common stock received
in the exercise of the stock appreciation right will be equal to the
compensation income recognized with respect to the common stock. The
participant's holding period for shares acquired after the exercise of a stock
appreciation right begins on the exercise date. Income and payroll taxes are
required to be withheld on the amount of compensation attributable to the
exercise of the stock appreciation right, whether the income is paid in cash or
shares. Upon the exercise of a stock appreciation right, the participant's
employer will generally be entitled to a deduction in the amount of the
compensation income recognized by the participant.

     Certain Limitations on Deductibility of Executive Compensation.  With some
exceptions, Section 162(m) of the Internal Revenue Code limits the deduction to
us or the participant's employer, as applicable, for compensation paid to the
applicable employees in excess of $1 million per executive per taxable year.
However, compensation paid to applicable employees will not be subject to that
deduction limit if it is considered "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code. Compensation to be paid to the
applicable employees under the 2002 stock incentive plan is intended to be
qualified performance-based compensation.

     Amendment and Termination.  The 2002 stock incentive plan may be amended or
terminated by the committee at any time, without the approval of shareholders or
participants, provided that no action may, without a participant's written
consent, adversely affect any previously granted award, and no amendment that
would require shareholder approval under applicable law or under the Code,
including but not limited to Section 162(m), may become effective without
shareholder approval. With respect to incentive stock options, no grants may be
made under the 2002 stock incentive plan after a date which is 10 years
following the effective date of that plan, unless the 2002 stock incentive plan
has been terminated prior to that date.


  EXECUTIVE PERFORMANCE COMPENSATION PLAN



     Our board of directors and shareholder recently approved the adoption of
our executive performance compensation plan. The purpose of our executive
performance compensation plan is to address limitations on the deductibility of
executive compensation under Section 162(m) of the Code.



     Under the executive performance compensation plan each year the committee
establishes performance criteria for determining the amount of bonus
compensation available under the 2002 executive performance compensation plan
for executive officers who have wide ranging responsibilities for our overall

                                        97



performance. Bonuses based upon the formulas established under the executive
performance compensation plan may be subject to significant variations from year
to year, given the potential volatility of some of the financial services
businesses in which we engage. No annual award under the plan may exceed
$5,000,000. The performance goals may be established based on any or all of the
following:


     - combined loss and expense ratio;

     - earnings per share;

     - net income;

     - adjusted net income;

     - return on equity;

     - cash return on equity;

     - return on assets;

     - earnings before interest and taxes;

     - operating income;

     - cash flow(s);

     - stock price; or

     - strategic business objectives consisting of one or more objectives based
       on meeting specified cost targets, business expansion goals, and goals
       relating to acquisitions or divestitures.


     Prior to the beginning of each period during which the performance will be
determined, or at a later time as may be permitted by the applicable provisions
of the Code, the committee will establish an award for each of the eligible
executive officers. Under the executive performance compensation plan, prior to
the payment of any award under the plan, the committee must certify the
achievement of the performance goals in respect of such award.


     Awards may be paid in the form of cash or in stock, restricted stock,
options or other stock-based or stock-denominated awards from shares reserved
for issuance under our 2002 stock incentive plan or any successor plan or any
other form of consideration or any combination as may be determined by the
committee, in its discretion.


  COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS



     General.  Our board of directors recently approved the compensation plan
for non-employee directors. The compensation plan provides for each director to
receive his or her annual fixed director compensation either entirely in shares
of our common stock or up to 50% in cash and the remainder in our common stock
or options to purchase our common stock from shares reserved for issuance under
our 2002 stock incentive plan or any successor plan. Each member of our board of
directors who is not an employee of ours or any of our affiliates is eligible to
participate in the plan. If an eligible director does not elect to receive a
percentage of his or her annual fixed director compensation in cash or stock
options, that compensation will be paid entirely in our common stock from shares
reserved for issuance under our 2002 stock incentive plan or any successor plan.
Under the terms of the compensation plan, an eligible director may defer receipt
of his or her stock but may not defer any cash payment.


     Administration.  The plan will be administered by the personnel,
compensation and directors committee of our board of directors. The committee
will have the responsibility for carrying out the terms of the plan, including
but not limited to the determination of the annual retainer to be paid to all
eligible directors, referred to in this section as the "annual fixed director
compensation." To the extent permitted under the applicable securities laws or
the Internal Revenue Code, the committee may exercise the discretion granted to
the board under the plan. The board of directors may also designate a plan
administrator to manage the record keeping and other routine administrative
duties under the plan.
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     Stock Options.  In addition to annual fixed director compensation, the
board of directors may make an annual grant to eligible directors of options to
purchase our common stock in accordance with the terms and conditions of our
2002 stock incentive plan or any successor plan.

     Compensation.  Payment of annual fixed director compensation will be made
quarterly, on the first business day following the end of the quarter for which
the compensation is payable to each eligible director who served as a director
during at least one-half of that quarter.

     Election to Defer.  As soon as practicable prior to the beginning of a
calendar year or within 30 days after his or her term begins, an eligible
director may elect to defer the common stock component of annual fixed director
compensation under the plan by directing that all of the annual fixed director
compensation which otherwise would have been payable during that calendar year
and succeeding calendar years will be credited to a deferred compensation
account, referred to as the "director's account."

     The Director's Account.  If an eligible director elects to defer
compensation payment under the plan, all annual fixed director compensation that
was so deferred will be credited to the director's account as follows:

     - At the payment date of the annual fixed director compensation, we will
       credit to the director's account the number of shares of our common stock
       obtained by multiplying the percentage that eligible director has elected
       to receive in shares of common stock by the total amount of the annual
       fixed director compensation allocable to that calendar quarter, and then
       by dividing the result by the average of the closing price of our common
       stock on the NYSE on the last 10 trading days of the calendar quarter for
       which the compensation is payable. If the applicable percentage of the
       annual fixed director compensation for the calendar quarter is not evenly
       divisible by that average closing price of our common stock, the balance
       will be credited to the director's account in cash.

     - At the end of each calendar quarter, we will credit to the director's
       account an amount equal to the cash dividends that would have been paid
       on the number of shares of common stock credited to the director's
       account as of the dividend record date, if any, occurring during that
       calendar quarter as if those shares had been shares of issued and
       outstanding common stock on the record date, and that amount will be
       treated as reinvested in additional shares of common stock.

     - Cash amounts credited to the director's account under the above two
       bullet points will accrue interest commencing from the date the cash
       amounts are credited to the director's account at a rate per annum to be
       determined from time to time by us. Amounts credited to the director's
       account will continue to accrue interest until distributed in accordance
       with the plan.

     - An eligible director will not have any interest in the cash or common
       stock in his or her director's account until that cash or common stock is
       distributed in accordance with the plan.

     Distribution from Accounts.  At the time an eligible director makes an
election to defer receipt of annual fixed director compensation, that director
may elect to receive the amount in one lump-sum payment or in a number of
approximately equal annual installments not exceeding 15 years. Subject to
various conditions, an eligible director participating in the plan may change
the method of distribution he or she previously elected.

     Change of Control.  Upon a "change of control," as defined in our 2002
stock incentive plan, the full number of shares of common stock and cash in each
director's account will be immediately distributed.

     Transferability.  The right of an eligible director to receive any amount
in the director's account will not be transferable or assignable by that
director except by will or by the laws of descent and distribution.

     Termination.  The plan will continue in effect until terminated by the
board of directors. The board of directors may at any time amend or terminate
the plan.

                                        99


EMPLOYMENT AGREEMENT

     On March 7, 2002, we entered into an employment agreement with Mr. Lipp,
pursuant to which Mr. Lipp will serve as our chairman and chief executive
officer, for a period of 5 years from the completion of this offering, subject
to early termination. Mr. Lipp's annual base salary will be not less than
$600,000 and he will participate in our bonus and other incentive plans intended
for our senior management. Mr. Lipp will be granted a one time grant of options
to purchase shares of our class A common stock with an aggregate value of $80
million, based on the initial public offering price, at an exercise price equal
to the public offering price. 20% of the options will vest on each anniversary
of the completion of this offering, except that the first 20% will vest on the
earlier of (1) the 18-month anniversary of completion of this offering and (2)
the later of (x) the distribution and (y) the one-year anniversary of completion
of this offering. The options will be fully vested and immediately exercisable
in the event that the distribution does not occur by June 1, 2003 and, between
such date and December 31, 2003, either Mr. Lipp's employment is terminated by
us without cause or Mr. Lipp resigns for any reason. In addition, the options
will be fully vested and immediately exercisable if Mr. Lipp's employment is
terminated by us without cause or by him for a good reason, or in the event of
death, disability or a change in control. Mr. Lipp is also entitled to certain
benefits and perquisites.

     The agreement also provides that if, after the distribution and during the
term of the agreement:

     - Mr. Lipp's employment is terminated by us without cause or by him for a
       good reason, he will be entitled to (1) a lump sum payment in an amount
       equal to two times the sum of (a) his annual salary and (b) the highest
       annual bonus paid to him for the three performance years prior to his
       termination and (2) all accrued benefits;

     - Mr. Lipp's employment is terminated by him for any reason during a 60-day
       period beginning 6 months after a change in control which occurs
       following the distribution or if his employment is terminated by us
       without cause or by him with good reason during the period beginning on
       the later of 6 months prior to such change of control or the distribution
       and ending two years after such change of control, he will be entitled to
       (1) a lump sum payment in an amount equal to three times the sum of (a)
       his annual salary and (b) the highest annual bonus paid to him for the
       three performance years prior to his termination and (2) all accrued
       benefits.

     As a condition to receiving the above described payments and benefits, Mr.
Lipp will be subject to a non-solicitation agreement for one year following the
termination of the agreement.

AIRPLANE LEASE

     We expect to enter into an agreement on arms' length terms with Mr. Lipp
pursuant to which we will lease from Mr. Lipp an airplane which he owns. The
airplane, together with two aircraft that we will purchase from Citigroup, will
provide us with the number and mix of aircraft that we believe is appropriate
for our business. We will submit the agreement to our independent directors for
approval.

                                       100


                           OWNERSHIP OF COMMON STOCK

     Prior to the completion of this offering, all shares of our common stock
were beneficially owned by Citigroup, whose principal offices are located at 399
Park Avenue, New York, New York. After the completion of this offering,
Citigroup will beneficially own all of our outstanding class B common stock and
290 million shares of our class A common stock, representing 94.8% of the
combined voting power of all classes of our voting securities and 79% of the
equity interest in us, assuming the over-allotment option is not exercised.

                                       101


                 ARRANGEMENTS BETWEEN OUR COMPANY AND CITIGROUP

     In April 1996, TIGHI entered into agreements with affiliates of Citigroup,
including us, in connection with its 1996 public offering of its class A common
stock. A primary purpose of entering into those agreements at that time was to
formalize its business arrangements with Citigroup so that it could conduct its
operations on a stand-alone basis and provide its public stockholders with a
basis to analyze the results of its operations. The agreements address
substantially all of TIGHI's business relationships with Citigroup, including,
among others, those related to:

     - corporate governance;

     - the licensing of intellectual property;

     - indemnification;

     - employee and benefit plan matters;

     - provision of services;

     - leasing of real property;

     - administrative services; and

     - tax allocations.


     Despite our completion of a tender offer in April 2000, which resulted in
TIGHI once again becoming an indirect wholly-owned subsidiary of Citigroup,
these agreements have remained in force and have continued to govern TIGHI's
relationship with Citigroup. In connection with this offering and in
contemplation of the distribution announced by Citigroup, we will terminate
these agreements and enter into a new intercompany agreement with Citigroup and
The Travelers Insurance Company to reflect new arrangements, developments and
current business conditions. The new intercompany agreement will become
effective and replace the 1996 agreements prior to the completion of this
offering. These agreements do not contain any provisions that obligate
Citigroup, in any way, to effect the distribution and we cannot assure you that
the distribution will be consummated by the end of 2002 or at all.


INTERCOMPANY AGREEMENT

     Intellectual Property.  Under the intercompany agreement, we will own the
"Travelers" name and mark, and we will grant Citigroup the right to make various
uses of the "Travelers" name and mark subject to conditions to be agreed upon by
us and by Citigroup, and Citigroup will own the "umbrella" mark and will grant
us a right to make various uses of the "umbrella" mark and other Citigroup marks
for two years from the date of completion of this offering. Each of these rights
will be subject to extension as may be required by applicable law or applicable
pre-existing contractual commitments. In addition, we will grant Citigroup the
right to use the "Travelers Life and Annuity," "The Travelers Insurance Company"
and "The Travelers Life and Annuity Company" names and marks and other names and
marks containing "Travelers" for use in Citigroup's life insurance and annuity
business under terms to be mutually agreed upon by us and Citigroup.

     We have also agreed with Citigroup that we will take all reasonable action
to negotiate in good faith an agreement with respect to the right to make and
use the inventions claimed in some of our and Citigroup's respective patents and
patent applications and other terms of these trademark- and patent-related
agreements.

                                       102


     Indemnification.  The intercompany agreement provides that we will
indemnify Citigroup and its officers, directors, employees and agents against
losses (including, but not limited to, litigation matters and other claims)
based on, arising out of or resulting from:

     - any breach by us of the intercompany agreement or any other agreement
       with Citigroup,


     - any claims alleging that the trademarks we licensed to Citigroup that are
       used within the scope of the license infringe on a third party's
       intellectual property rights,


     - the ownership or the operation of our assets or properties, and the
       operation or conduct of our business,

     - any other activities we engage in,


     - our use of the trademarks licensed to us by Citigroup that is in breach
       of the license,


     - any other acts or omissions arising out of performance of the
       intercompany agreement and the other agreements described in this
       section,

     - any guaranty, keep well, net worth or financial condition maintenance
       agreement of or by Citigroup provided to any parties with respect to any
       of our actual or contingent obligations, and

     - other matters described in the intercompany agreement.

     In addition, we have agreed to indemnify Citigroup and its officers,
directors, employees and agents against civil liabilities, including liabilities
under the Securities Act of 1933, relating to misstatements in or omissions from
the registration statement of which this prospectus forms a part and any other
registration statement that we file under the Securities Act, other than
misstatements or omissions made in reliance on information relating to and
furnished by Citigroup for use in the preparation of that registration
statement, against which Citigroup has agreed to indemnify us. Citigroup has
also agreed to indemnify us and our officers, directors, employees and agents
against losses (including, but not limited to, litigation matters and other
claims) based on, arising out of or resulting from:

     - any breach by Citigroup of the intercompany agreement or any other
       agreement with us,

     - the ownership or the operation of Citigroup's assets or properties,
       including the assets and liabilities transferred in connection with our
       corporate reorganization and the operation or conduct of Citigroup's
       business, in each case excluding us,


     - any use of the trademarks we licensed to Citigroup that is in breach of
       the license,


     - any claims that the trademarks Citigroup licensed to us that we use
       within the scope of the license infringes a third party's intellectual
       property rights, and

     - other matters described in the intercompany agreement.


     Financial Information.  We have agreed that, for so long as Citigroup
beneficially owns at least 20% of the combined voting power of all our
outstanding common stock, or is required to account for its investment in us on
a consolidated basis or under the equity method of accounting, we will provide
Citigroup with:


     - copies of monthly, quarterly and annual financial information and other
       reports and documents we intend to file with the SEC prior to those
       filings;

     - copies of our budgets and financial projections, as well as the
       opportunity to meet with our management to discuss those budget
       projections;

     - information regarding the timing and content of earnings releases; and

     - such materials and information as necessary to cooperate fully, and cause
       our accountants to cooperate fully, with Citigroup in connection with any
       of its public filings.

                                       103


     For so long as Citigroup beneficially owns at least 50% of the combined
voting power of all our outstanding common stock, or is required to account for
its investment in us on a consolidated basis, in addition to the items mentioned
above, we will provide Citigroup with:

     - access to our books and records;

     - notice of changes in our accounting estimates or discretionary accounting
       principles, and in some cases refrain from making those changes without
       Citigroup's prior consent;

     - a quarterly representation of our chief financial or accounting officer
       as to the accuracy and completeness of the financial records;

     - detailed quarterly and annual financial information; and

     - copies of correspondence with our accountants.

     For so long as Citigroup beneficially owns at least 9% but less than 20% of
the combined voting power of all our outstanding common stock, we will provide
Citigroup with:

     - SEC reports and notices to shareholders; and


     - the right to inspect our books and records.



     Registration Rights.  The intercompany agreement provides that Citigroup
can demand that we register the distribution of shares of our common stock owned
by Citigroup after this offering, so called "demand" registration rights. In
addition, Citigroup has so-called "piggyback" registration rights, which means
that Citigroup may include its shares in any future registrations of our common
equity securities, whether or not that registration relates to a primary
offering by us or a secondary offering by or on behalf of any of our
shareholders. These registration rights are transferable by Citigroup. We have
agreed to pay all costs and expenses in connection with each such registration,
except underwriting discounts and commissions applicable to the shares of common
stock sold by Citigroup. The intercompany agreement contains customary terms and
provisions with respect to, among other things, registration procedures and
rights to indemnification in connection with the registration of the common
stock on behalf of Citigroup. We have also agreed to register sales of shares of
our common stock owned by employees of Citigroup pursuant to employee stock or
option plans, but only to the extent such registration is required for the
shares to be freely tradeable.


     Reimbursement Agreements.  We have agreed to pay all costs and expenses
incurred in connection with the offerings, the distribution, and the related
transactions that are occurring substantially simultaneously with this offering
and the distribution, except as otherwise described in this prospectus.

     Equity Purchase Rights.  We have agreed that, to the extent permitted by
the principal national securities exchange in the United States upon which our
common stock is listed and so long as Citigroup beneficially owns at least 20%
of the combined voting power of all our outstanding common stock, Citigroup may
purchase its pro rata share, based on its then current percentage equity
interest in us, of any voting equity security issued by us, excluding any
securities offered in connection with this offering and under employee stock
options or other benefit plans, dividend reinvestment plans and other offerings
other than for cash.


     Business Relationships.  We are currently reviewing whether existing
arrangements for the distribution of our property and casualty products through
Citigroup's distribution channels will remain in place. We have agreed that,
following the distribution, all exclusive distribution arrangements between us
and Citigroup will be terminated unless specifically agreed. We have agreed with
Citigroup that, promptly following this offering, the parties will take all
reasonable action to negotiate in good faith a mutually acceptable arrangements
for the distribution of our property and casualty insurance products through
Citigroup's distribution channels to take effect after the distribution. We and
Citigroup are also reviewing additional business relationships. We have agreed
with Citigroup that we will use the Diners Club credit card as our exclusive
corporate credit card for a period of one year after the distribution. We will
continue to purchase annuities for structured settlements from Citigroup after
the distribution on the same

                                       104


economic terms as exist today, through 2003, and thereafter on terms to be
mutually agreed upon. During 2004, we will use Citigroup as our most preferred
provider of structured settlement claims, as long as the applicable Citigroup
company maintains competitive ratings and its products are competitively priced.


     Employee Benefits. Currently our employees participate in several of
Citigroup's benefit and welfare plans, such as retirement programs, incentive
compensation plans, medical benefits and others. Our board of directors and
Citigroup, as our sole shareholder, have recently approved our incentive
compensation plans, which are summarized elsewhere in this prospectus and which
will become effective upon completion of this offering. By the distribution, we
are required to adopt all of our own benefit and welfare plans and switch our
active employees, and transfer the assets relating to these employees, over to
these new plans.


     Citigroup Stock Awards.  In the event the tax-free distribution is
consummated, we intend to replace equity-based awards held by our employees as
of that date under Citigroup's various incentive plans with similar awards under
our incentive plans. In the case of Citigroup awards other than stock options,
such as CAP awards of restricted stock and deferred shares, we generally intend
to convert these awards into substitute awards relating to our shares -- the
value of awards converted into substitute awards will be equal to the value of
the Citigroup awards prior to the distribution. In the case of Citigroup awards
consisting of stock options, we intend to convert each option on an equitable
basis into an option to purchase our common stock. The number of shares of our
stock to which the new options relates and the per share exercise price of the
new option will be determined so that:

     - the aggregate "spread" inherent in the Citigroup option, which is the
       difference between the trading price of Citigroup shares prior to the
       distribution and the exercise price of the Citigroup option, is preserved
       in the new option for our shares; and

     - the ratio of the exercise price of the new option to the trading price of
       our shares after the distribution is equal to the ratio of the exercise
       price of the Citigroup option to the trading price of Citigroup shares
       prior to the distribution. All other terms of the new equity awards will
       be the same as those of the Citigroup equity awards being replaced.

     It is not possible at this time to specify how many shares of our common
stock will be subject to substitute awards for Citigroup awards, because the
number is dependent on future share price data. Our shareholders, are, however,
likely to experience some dilutive impact from the above-described adjustments.

     As of March 5, 2002, there were approximately 31.7 million shares of
Citigroup common stock subject to options under Citigroup awards, 11.7 million
of which are currently exercisable, held by our employees and approximately 1.7
million shares of Citigroup common stock subject to other equity-based awards
held by our employees. If the adjustments were determined using the closing
price of the Citigroup common stock on March 4, 2002, on the NYSE ($47.61 per
share), and a price of $17.50 per share of our common stock, the mid-point of
the range set forth on the cover page of this prospectus, the foregoing number
of shares of Citigroup common stock subject to Citigroup stock options would be
replaced with options to purchase approximately 86.2 million shares of our
common stock and the foregoing number of shares of Citigroup common stock
subject to other Citigroup equity-based awards would be replaced with
equity-based awards of approximately 4.6 million shares of our common stock.

     Non-Solicitation and Non-Hire of Employees.  We have agreed with Citigroup
that for a period of two years following the completion of the offerings,
neither of us will solicit or hire for employment each other's employees with
total base salary plus bonus of $200,000 or more, without the consent of the
other party.

     Right of First Offer.  We have agreed with Citigroup that, for a period of
two years following the distribution, we will have the right of first offer to
provide Citigroup property and casualty coverage that we do not currently
provide it and Citigroup will have the right of first offer to provide us any
financial service it does not currently provide us, at market rates, terms and
conditions at the time of the offer.

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Neither party will be required to purchase the services at rates, terms or
conditions less favorable than those offered by any third party at the time of
the offer.


     We will also be allocating various expenses and liabilities related to
properties leased by us and Citigroup.


     Other Provisions.  The intercompany agreement also provides for:

     - the provision of insurance and allocation and/or reimbursement of costs
       and premiums of that insurance;

     - the provision of data processing services and allocation and/or
       reimbursement of costs of those services;

     - cross-licensing of computer software;

     - volume purchasing arrangements;

     - the provision of benefits and participation in benefit and retirement
       plans and reimbursement for the costs of administration of those plans
       until the distribution;

     - the sale of aviation equipment and the reimbursement for the costs
       related to the provision of aviation services until the distribution;

     - joint Internet marketing arrangements;

     - litigation and settlement cooperation;

     - promotional arrangements;

     - provisions governing other relationships among members of Citigroup, on
       the one hand, and us, on the other hand.


     Dispute Resolution.  The intercompany agreement contains provisions that
govern, except as provided in any other intercompany agreement, the resolution
of disputes, controversies or claims that may arise between us and Citigroup.
The intercompany agreement generally provides that the parties will attempt in
good faith to negotiate a resolution of disputes arising in connection with the
intercompany agreement without resorting to arbitration. If these efforts are
not successful, the dispute will be submitted to binding arbitration in
accordance with the terms of the intercompany agreement, which provides for the
selection of a three-arbitrator panel and the conduct of the arbitration
hearing, including limitations on the discovery rights of the parties. Except in
certain very limited situations such as procedural irregularities or absence of
due process, arbitral awards are generally final and non-appealable, even if
they contain mistakes of law.



     Further Actions and Assurances.  We have agreed with Citigroup that, at any
time after the date of the intercompany agreement and prior to the distribution,
the parties will take all reasonable action to ensure that any assets,
properties, liabilities and obligations related to the property and casualty
business which were not identified as of the reorganization will be promptly
transferred and conveyed to us, and conversely, any assets, properties,
liabilities and obligations not related to the property and casualty business
which were not identified as of the reorganization will be promptly transferred
and conveyed to Citigroup.



     Transition Services Agreement.  We have agreed with Citigroup that,
promptly following the completion of the offerings, we will take all reasonable
action to negotiate in good faith the terms of a transition services agreement
for the provision of certain facilities sharing, systems, corporate,
administrative and other existing shared services to take effect after the
distribution. This agreement will reflect pricing terms for these services to be
mutually agreed upon subject to all applicable regulatory requirements. The term
for the provision of each service will be one year, except for the provision of
data processing services and related support, which will be two years, subject
to an extension for another one-year term upon advance notice from the receiving
party, services related to the accident department of The Travelers Insurance
Company operated for the benefit of TPC will be two years and payroll and human


                                       106



resources services, which will be two years plus the remaining portion of the
second year. The cost for the provision of each transition service will reflect
payment terms consistent with the current cost allocation, as may need to be
adjusted based on current standards. Any additional costs imposed by a third
party for the provision of a transition service will be allocated to the party
receiving such transition service. We intend to develop our own internal
capabilities in the future in order to reduce our reliance on Citigroup for such
services. Each party will have the right to reasonable audit rights for the
transition services provided to the other party.



REAL ESTATE



     We have agreed to separate the real estate owned, leased and subleased by
us and Citigroup based upon our business operations. To effectuate the
foregoing, in addition to the purchase of the six buildings in Hartford,
Connecticut from Citigroup and the assignment of the CityPlace office space
lease to Citigroup, we will be:



     - entering into assignment agreements so that we no longer lease premises
      occupied by Citigroup within which no portion of our business is located;



     - entering into sublease arrangements, either in the capacity of sublessor
      or sublessee, so that there will be formal leasing arrangements between us
      and Citigroup with respect to each location that will be occupied by both
      Citigroup and us after this offering; and



     - taking various leasehold interests from Citigroup by assignment.



INDEMNIFICATION AGREEMENT



     We will enter into an agreement with Citigroup that will provide that in
the event that in any fiscal year we record additional asbestos-related income
statement charges in excess of $150 million, net of any reinsurance, Citigroup
will pay to us the amount of any such excess up to a cumulative aggregate of
$800 million, reduced by the tax effect of the highest applicable federal income
tax rate.


INVESTMENT ADVISORY


     We have also agreed with Citigroup that we will take all reasonable action
to negotiate in good faith an agreement under which a Citigroup affiliate will
provide investment advisory services to us for a period and at fees to be
mutually agreed upon.


TAX SHARING AGREEMENT

     We and Citigroup are parties to a tax sharing agreement, which generally
provides for the filing of consolidated and combined federal and some state
income tax and franchise tax returns, the allocation of income tax liabilities
between us and Citigroup, the conduct of tax audits and the handling of tax
controversies and various related matters. The tax sharing agreement governs
these tax-related matters for taxable periods before and after this offering.

     Our items of income, loss, deductions and credits are currently included in
the consolidated and combined tax returns of Citigroup for federal income and
some state tax purposes.

     Following this offering, we will no longer be included in Citigroup's
consolidated or combined group for federal or state tax purposes. Under the tax
sharing agreement, we will indemnify Citigroup for tax liabilities that are
allocated to us for periods prior to the offering. The amount of taxes allocated
to us for such periods is generally equal to the federal income or state income
or franchise taxes that would have been payable by us during such periods if we
had filed separate consolidated or combined returns with our own subsidiaries.
In addition, each member of a consolidated group is severally liable for the
federal income tax liability of each other member of the consolidated group.
Accordingly, with respect to periods in which we have been included in
Citigroup's consolidated group, we could be liable for any federal tax liability
incurred, but not discharged, by any other member of Citigroup's consolidated
group. After this

                                       107


offering, we will have the right to be notified of and participate in tax
matters for which we are financially responsible under the terms of the tax
sharing agreement and, except as provided in the next paragraph, we will
generally control such matters.

     In addition, we have agreed in the tax sharing agreement to cooperate fully
with Citigroup in its efforts to obtain a private letter ruling relating to the
distribution, including making representations and warranties to Citigroup and,
if requested by Citigroup, to the Internal Revenue Service, regarding our
company and our business. We will indemnify Citigroup for any taxes arising out
of the failure of the distribution to qualify as tax-free as a result of our
actions or inaction, and we will have the right to control with Citigroup the
disposition of any audits, litigation or other controversies with any taxing
authorities regarding such taxes.

     The tax-sharing agreement further provides for cooperation between
Citigroup and us with respect to tax matters, the exchange of information and
the retention of records which may affect the income tax liability of the
parties to the agreement.

OTHER INTERCOMPANY ARRANGEMENTS

     We have other intercompany arrangements with Citigroup, some of which we
anticipate will be phased out over a brief period of time following the
distribution. If the distribution does not occur, these arrangements will likely
continue for the foreseeable future.

     Shared Services.  Prior to this offering, Citigroup has provided corporate
staff services, including legal, internal audit and other services, to us at
cost under a service reimbursement agreement and may, but will not be obligated
to, continue to do so following completion of the distribution.

     We and various of our current subsidiaries are parties to an expense
allocation agreement that provides for the allocation among the parties of costs
for services provided to or by the parties. These services include, but are not
limited to:

     - financial management,

     - operational management,

     - professional services,

     - human resources and benefit plans,

     - administrative,

     - transportation,

     - risk management,

     - government relations, and

     - the acquisition of equipment, software and office space.

     Charges for these shared services are allocated at cost, and no party is
expected to realize a profit or incur a loss as a result of providing or
obtaining services under the agreement. The agreement may be terminated as to
any party upon prior notice to the other parties. If the distribution occurs, we
have agreed with Citigroup to negotiate in good faith the terms of a transition
services agreement for the provision of the above services.

INTERCOMPANY TRANSACTIONS DURING THE PAST THREE YEARS

     We have recently agreed to transfer substantially all our assets to
Citigroup, other than the capital stock of TIGHI, and Citigroup has agreed to
assume all of our third-party liabilities, other than liabilities relating to
TIGHI and TIGHI's active employees. This transfer will be effective prior to the
completion of this offering. In this section, we refer to the operations being
transferred as our "transferred operations."

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     Set forth below is a summary of our related party transactions. Because
TIGHI will comprise substantially all of our operations following the offering,
we have separately presented information for related party transactions relating
to the transferred operations under the caption "-- Transactions Involving Our
Transferred Operations."

     Leases.  During the three-year period ended December 31, 2001, we rented
from Citigroup approximately 1,030,000 square feet of office space in Hartford,
Connecticut, under a ten-year lease that is due to expire on April 1, 2006.
Intercompany rent expense has been shared on a cost allocation method based
generally on estimated usage by department and was $15 million for each of 2001,
2000 and 1999. We have agreed to purchase these premises and other properties
from Citigroup for $68 million.

     We have subleased various premises from Citigroup, and on an informal
basis, subleased various premises to Citigroup, during the past three years.
Premises leased from Citigroup include 6,428 square feet at 200 Columbus
Boulevard, Hartford, Connecticut. The informal subleases to Citigroup include,
without limitation, 22,757 square feet within the 90 State House Square complex
in Hartford, Connecticut, 7,835 square feet within the 50/58 State House Square
complex in Hartford, Connecticut and various premises within the 168 field and
claim offices throughout the United States.

     We also lease furniture and equipment from Citigroup. The rental expense
charged to us for this furniture and equipment was $18 million, $18 million and
$28 million in 2001, 2000 and 1999, respectively.

     Benefit Plan Administration.  We participate in a qualified,
noncontributory defined benefit pension plan of Citigroup. Our allocated share
of net expense (credit) for this plan during 2001, 2000 and 1999 was $(14)
million, $(11) million and $11 million, respectively.

     Administrative Services.  We provide administrative services to Citigroup.
Settlements for these functions between us and Citigroup are made regularly.
Investment advisory and management services and data processing services are
provided to us by Citigroup. Our allocated share of net expense for these
services, net of services we provided, during 2001, 2000 and 1999 was $16
million, $7 million and $15 million, respectively.

     Investment Pool.  An affiliate of Citigroup maintains a short-term
investment pool in which we participate. The positions of each company
participating in the pool are calculated and adjusted daily. At December 31,
2001, 2000 and 1999, the pool totaled approximately $5.6 billion, $4.4 billion
and $2.6 billion, respectively. Our share of the pool amounted to $2.4 billion,
$2.3 billion and $1.4 billion at December 31, 2001, 2000 and 1999, respectively.

     Capital Accumulation Program.  We participate in the Citigroup capital
accumulation program. For the January 2000 and January 1999 restricted stock
awards, participating officers and other employees received 50% of their
restricted stock award in the form of Citigroup common stock. In connection with
the cash tender offer completed by Citigroup in 2000, all shares of restricted
common stock under our then existing capital accumulation program were
eliminated and substantially all were replaced with restricted Citigroup common
stock. All of the restricted stock awards granted on January 16, 2001 were in
the form of Citigroup common stock. Similar to our old plan, these restricted
stock awards generally vest after a three-year period and, except under limited
circumstances, the stock can not be sold or transferred during the restricted
period by the participant, who is required to render service to us during the
restricted period. Unearned compensation expense associated with the Citigroup
restricted common stock grants, which represents the market value of Citigroup's
common stock at the date of grant, and the remaining unamortized portion of our
previous plan shares, is included with other assets in the consolidated balance
sheet and is recognized as a charge to income ratably over the vesting period.
The after-tax compensation cost charged to earnings for these restricted stock
awards was $13 million, $12 million and $2 million for the years ended December
31, 2001, 2000 and 1999, respectively.

     Stock Option Plan.  We also participated in the past in a stock option plan
sponsored by Citigroup that provides for the granting of stock options in
Citigroup common stock to officers and other employees. To further encourage
employee stock ownership, Citigroup introduced the WealthBuilder stock option

                                       109


program during 1997 and the Citigroup Ownership Program in 2001. Under these
programs all employees meeting established requirements have been granted
Citigroup stock options.

     During 2000 and 2001, Citigroup introduced the Citigroup 2000 Stock
Purchase Plan and Citigroup 2001 Stock Purchase Program for new employees, which
allowed eligible employees of Citigroup, including our employees, to enter into
fixed subscription agreements to purchase shares at the market value on the date
of the agreements. Enrolled employees are permitted to make one purchase prior
to the expiration date. For more information, see note 15 to our consolidated
financial statements.

     Letter of Credit.  At December 31, 2001 and 2000, we had $102 million of
securities pledged as collateral to Citibank, N.A. to support a letter of credit
facility for some of our surety customers.

     Brokerage and Investment Banking.  In the ordinary course of business, we
purchase and sell securities through Citigroup's broker-dealers. These
transactions are conducted on an arm's-length basis. Commissions are not paid
for the purchase and sale of debt securities.

     In addition, Salomon Smith Barney Inc., an affiliate of Citigroup, performs
investment banking and advisory services for us. Fees and commissions for these
services were $5 million and $14 million during 2001 and 2000, respectively. We
paid no such fees or commissions in 1999.

     Salomon Smith Barney Inc. and Salomon Brothers International Limited are
underwriters of this offering and if this offering is successful, Salomon Smith
Barney Inc. and Salomon Brothers International Limited will receive commissions
of approximately $  million and $  million, respectively.

     Reinsurance.  We purchase annuities from a subsidiary of Citigroup to
settle claims. Reinsurance recoverables at December 31, 2001, 2000 and 1999
included $825 million, $811 million and $799 million, respectively, related to
these annuities.

     Sales to Affiliates.  We sell commercial lines insurance to affiliates of
Citigroup. Related premiums and fees were $5 million, $4 million and $4 million
during 2001, 2000 and 1999, respectively.

     Notes Payable to Affiliates.  In February 2002, our board of directors
declared a dividend of $1.0 billion to Citigroup in the form of a non-interest
bearing note payable on December 31, 2002. We expect to repay this note from
future earnings, to the extent available.

     In February 2002, our board of directors also declared a dividend of $3.7
billion to Citigroup in the form of a $3.7 billion note payable in two
installments. The first installment of $150 million will be payable on May 9,
2004 and the second installment of $3.55 billion will be payable on February 7,
2017. This note begins to bear interest after May 9, 2002 at a rate of 7.25% per
annum. This note may be prepaid at any time in whole or in part without penalty
or premium. We expect that substantially all of this note will be prepaid with
the proceeds of the offerings. See "Use of Proceeds."

     At December 31, 2000 and 1999, we had a note payable to Citigroup with a
principal balance of $287 million and $1.3 billion, respectively. There was no
balance outstanding at December 31, 2001. Interest expense included in the
consolidated statement of income was $4 million, $49 million and $87 million in
2001, 2000 and 1999, respectively.

     We had a revolving credit facility in the amount of $250 million with a
syndicate of banks. An affiliate, Citibank, N.A., was the agent on this
facility, but did not participate as a lender. We paid agent fees of $30,000 in
each of 2001, 2000 and 1999. The facility expired on December 19, 2001.

     On December 19, 2001, we entered into a $250 million revolving line of
credit with Citigroup. The line, which replaced the expired line of credit from
a syndicate of banks described above, expires in December 2006. We pay Citigroup
a commitment fee, and if we borrow under this line, the interest rate will be
based on the cost of commercial paper issued by Citicorp. At December 31, 2001,
we had no loans outstanding under the line of credit.


     On April 13, 2001, we entered into a $500 million line of credit agreement
with Citicorp Banking Corporation, an affiliate. This line of credit expires in
December 2006. On April 16, 2001, we borrowed $275 million on the line of
credit. Proceeds from this borrowing together with $225 million of commercial
paper proceeds were used to pay a $500 million 6.75% long-term note payable. On
November 8, 2001, we


                                       110


borrowed another $225 million on this line of credit. This borrowing, the
proceeds of which were used to pay off maturing commercial paper, brought the
total borrowing under this line to $500 million as of December 31, 2001. The
loan matures in November 2003 and has an interest rate of 3.60%.

     In conjunction with the purchase of TIGHI's outstanding shares in April
2000, we borrowed $2.2 billion under a prior note agreement with Citigroup. At
December 31, 2001, the outstanding balance of the prior note payable to Citicorp
was $1.2 billion. Interest expense included in our consolidated statement of
income was $79 million in 2001 and $113 million in 2000. On February 7, 2002,
the prior note agreement was replaced by a new note agreement. At March 1, 2002,
the outstanding amount under the new note agreement was $1.1 billion.

     Other Transactions.  On February 28, 2002 we sold the stock of
CitiInsurance International Holdings Inc. to Citigroup for $403 million, its net
book value. We have applied $138 million of the proceeds of this sale to repay
intercompany indebtedness to Citigroup.

     On October 1, 2001, we paid $329 million to Associates First Capital Corp.,
an affiliate, for The Northland Company and its subsidiaries and Associates
Lloyds Insurance Company. In addition, on October 3, 2001, the capital stock of
CitiCapital Insurance Company, with a net book value of $356 million, was
contributed to us by an affiliate.

  TRANSACTIONS INVOLVING OUR TRANSFERRED OPERATIONS

     Our transferred operations market deferred annuity products and life
insurance through its affiliate, Salomon Smith Barney Inc. Premiums and deposits
related to these products were $1.6 billion, $1.9 billion, and $1.4 billion in
2001, 2000 and 1999, respectively.

     Our transferred operations also market individual annuity and life
insurance through CitiStreet Retirement Services, LLC (formerly The Copeland
Companies), a division of CitiStreet, which is a joint venture between Citigroup
and State Street Bank. Deposits received from CitiStreet Retirement Services,
LLC were $1.6 billion, $1.8 billion and $1.6 billion in 2001, 2000 and 1999,
respectively.

     During 1998, our transferred operations began distributing individual
annuity products through an affiliate, Citibank, N.A. Deposits received from
Citicorp Investment Services were $563 million in 2001, $392 million in 2000 and
were insignificant in 1999.

     At December 31, 2001, 2000 and 1999, our transferred operations had
outstanding loaned securities to Salomon Smith Barney with a value of $421
million, $234 million and $123 million, respectively.

     Included in other invested assets of our transferred operations is a $987
million investment in Citigroup preferred stock at December 31, 2001, 2000 and
1999, carried at cost. Dividends received on this investment were $32 million in
each of 2001, 2000 and 1999.

     In addition, Salomon Smith Barney performs investment banking and advisory
services for our transferred operations. Fees and commissions for these services
were $5 million and $3 million during each of 2001 and 2000, respectively. No
fees or commissions were paid in 1999.

     In the ordinary course of business, our transferred operations purchase and
sell securities through Salomon Smith Barney affiliated broker-dealers. These
transactions are conducted on an arm's-length basis.

     Primerica Life has entered into a General Agency Agreement with Primerica
Financial Services, Inc. that provides that Primerica Financial will be
Primerica Life's general agent for marketing all insurance of Primerica Life. In
consideration of such services, Primerica Life agreed to pay Primerica Financial
marketing fees of no less than $10 million based upon U.S. gross direct premiums
received by Primerica Life. In each of 2001, 2000, and 1999 the fees paid by
Primerica Life were $12.5 million.

     In 1998, PFS Investments Inc. became a distributor of products for our
transferred operations. PFS Investments Inc. sold $901 million, $1.03 billion
and $903 million of individual annuities in 2001, 2000 and 1999, respectively.

     Our transferred operations participate in a stock option plan sponsored by
Citigroup that provides for the granting of stock options in Citigroup common
stock to officers and other employees. During 2000 and
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2001, Citigroup introduced the Citigroup 2000 Stock Purchase Plan and Citigroup
2001 Stock Purchase Program for new employees, which allowed eligible employees
of Citigroup, including our employees, to enter into fixed subscription
agreements to purchase shares at the market value on the date of the agreements.
Enrolled employees are permitted to make one purchase prior to the expiration
date.

     Our transferred operations also participate in CAP. Participating officers
and other key employees receive a restricted stock award in the form of
Citigroup common stock. These restricted stock awards generally vest after a
three-year period and, except under limited circumstances, the stock cannot be
sold or transferred during the restriction period by the participant, who is
required to render service to Citigroup during the restricted period.

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                          DESCRIPTION OF CAPITAL STOCK

     Prior to the completion of this offering, our certificate of incorporation
and bylaws will be amended. Copies of the forms of our amended certificate of
incorporation and bylaws have been filed as exhibits to the registration
statement of which this prospectus is a part. The provisions of our amended and
restated certificate of incorporation and bylaws and relevant sections of the
Connecticut Business Corporation Act, or CBCA, are summarized below. For the
purpose of the description below of the corporate opportunity and interested
director provisions, the terms "we," "our," "us," and "Citigroup" include
subsidiaries and other entities in which they respectively own 50% or more of
the voting power or similar interests and, in the case of Citigroup, all
successors by way of merger, consolidation or sale of all or substantially all
of its assets.

CLASS A COMMON STOCK AND CLASS B COMMON STOCK

     Our authorized capital stock consists of 1.5 billion shares of class A
common stock, par value $0.01 per share, 1.5 billion shares of class B common
stock, par value $0.01 per share, and 50 million shares of preferred stock, par
value $0.01 per share. The following summary is qualified in its entirety by the
provisions of our certificate of incorporation and bylaws, copies of which have
been filed as exhibits to the registration statement of which this prospectus is
a part, and to the applicable provisions of the CBCA.

     On all matters submitted to a vote of shareholders, holders of class A
common stock are entitled to one vote per share and holders of class B common
stock are entitled to seven votes per share. Both classes vote together as a
single class on all matters, except that the holders of class A common stock are
entitled to vote as a separate class on, and must approve, any change to the
certificate of incorporation modifying the terms of the class A common stock
and/or the class B common stock which change would adversely affect the relative
rights of the class A common stock as compared to those of the class B common
stock and as otherwise required by law. Other than with respect to voting and
other than as required by law, the rights of the holders of the class A common
stock are identical to those of the class B common stock.

     After the completion of the offerings, Citigroup will beneficially own all
of our outstanding class B common stock and 290 million shares of our class A
common stock, representing 94.8% of the combined voting power of all classes of
our voting securities and 79% of the equity interest in us, assuming the over-
allotment option is not exercised. Therefore, Citigroup will have the power to
elect all of the members of our board of directors that are elected by
shareholders and will have the power to control all matters requiring
shareholder approval or consent. Citigroup has informed us that by year-end 2002
it plans to make a tax-free distribution to its stockholders of a portion of its
ownership interest in us, which, together with the shares being issued in this
offering, will represent approximately 90.1% of our common equity (more than 90%
of the combined voting power of our then outstanding voting securities). The
distribution and Citigroup's continuing ownership of shares thereafter are
subject to Citigroup's receipt of a private letter ruling from the Internal
Revenue Service that the distribution will be tax-free to Citigroup, its
stockholders and us, as well as various other conditions. We cannot assure you
that these conditions will be satisfied or that Citigroup will consummate the
distribution. In any event, Citigroup has no obligation to consummate the
distribution by the end of 2002 or at all, whether or not these conditions are
satisfied.

     Holders of our common stock are entitled to receive dividends ratably, as
may be declared by our board of directors on the common stock out of funds
legally available for the payment of those dividends.

     Upon the liquidation, dissolution or winding up of our company, the holders
of our common stock are entitled to receive their ratable share of the net
assets of our company available after payment of all debts and other
liabilities, subject to the prior rights of any outstanding preferred stock.
Holders of common stock have no preemptive, subscription or redemption rights.
The outstanding shares of common stock are, and the shares of class A common
stock offered by us in this offering will be, when issued and paid for, fully
paid and non-assessable.

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PREFERRED STOCK

     The board of directors has the authority, without any further vote or
action by the shareholders, to issue preferred stock in one or more series and
to fix the preferences, limitations and rights of the shares of each series,
including:

     - dividend rates,

     - conversion rights,

     - voting rights,

     - terms of redemption and liquidation preferences, and

     - the number of shares constituting each series.

TERMS OF CLASS OR SERIES DETERMINED BY BOARD OF DIRECTORS

     To the extent permitted by the CBCA, the board of directors may, without
shareholder approval:

     - classify any unissued shares of our capital stock into one or more
       classes or into one or more series within a class,

     - reclassify any unissued shares of any class of our capital stock into one
       or more classes or into one or more series within one or more classes, or

     - reclassify any unissued shares of any series of any class of our capital
       stock into one or more classes or into one or more series within a class.

ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND OTHER AGREEMENTS

     Shareholders' rights and related matters are governed by the CBCA, the
certificate of incorporation, the bylaws and the intercompany agreement.
Provisions of the CBCA, the certificate of incorporation, the bylaws and our
shareholder rights plan, which are summarized below, may discourage or make more
difficult a takeover attempt that a shareholder might consider in its best
interest. These provisions may also adversely affect prevailing market prices
for the common stock.

  BOARD OF DIRECTORS

     The certificate of incorporation provides that the board of directors will
be classified with approximately one-third elected each year. The number of
directors will be fixed from time to time by a majority of the total number of
directors which we would have at the time such number is fixed if there were no
vacancies. The directors will be divided into three classes, designated class I,
class II and class III. Each class will consist, as nearly as may be possible,
of one-third of the total number of directors constituting the entire board. The
initial division of the board into classes will be made by the decision of a
majority of the entire board. The term of the initial class I directors will
terminate on the date of the 2003 annual meeting of shareholders; the term of
initial class II directors will terminate on the date of the 2004 annual meeting
of shareholders; and the term of initial class III directors will terminate on
the date of the 2005 annual meeting of shareholders. At each annual meeting of
shareholders beginning in 2003, successors to the class of directors whose term
expires at that annual meeting will be elected for a three-year term. In
addition, if the number of directors is changed, any increase or decrease will
be apportioned among the classes so as to maintain the number of directors in
each class as nearly equal as possible, and any additional director of any class
elected to fill a vacancy resulting from an increase in such class will hold
office for a term that will coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. The board of directors has the sole authority to fill any
vacancy on the board of directors, whether such vacancy occurs as a result of an
increase in the number of directors or otherwise. The certificate of
incorporation also provides that, subject to the rights of holders of any class
or series of preferred stock then outstanding, directors may be removed only for
cause at a meeting of shareholders at which a quorum is present by the
affirmative vote of at least two-thirds of the votes entitled to be cast
thereon. Any amendment to the provisions of the

                                       114


certificate of incorporation described in this paragraph requires the
affirmative vote of at least 80% of the votes entitled to be cast on such
matter.

     After the completion of this offering, Citigroup will beneficially own all
of our outstanding class B common stock and 290 million shares of our class A
common stock, representing 94.8% of the combined voting power of all classes of
our voting securities and 79% of the equity interest in us, assuming the over-
allotment option is not exercised. Therefore, Citigroup will have the power to
elect all of the members of our board of directors that are elected by
shareholders and will have the power to control all matters requiring
shareholder approval or consent.

  SHAREHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

     The certificate of incorporation permits shareholders to take action by the
written consent of holders of all of our shares (or, as long as Citigroup
continues to own shares entitled to cast a majority of the votes entitled to be
cast in the election of directors, holders of not less than 80% of the votes
entitled to be cast) in lieu of an annual or special meeting. Otherwise,
shareholders will only be able to take action at an annual or special meeting
called in accordance with the bylaws. Notwithstanding the foregoing, directors
may not be elected by action of shareholders without a meeting of shareholders
other than by unanimous written consent or pursuant to a plan of merger or
consolidation.

     The bylaws provide that special meetings of shareholders may only be called
by:

     - the chairman of the board,

     - the vice chairman of the board,

     - the chairman of the executive committee,

     - the chief executive officer,

     - the president,

     - the secretary, or

     - by request in writing of the board or of the executive committee of the
       board.

     Under the CBCA, as it currently applies to us holders of at least 10% of
the votes entitled to be cast can require the calling of a special meeting.

  ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS RELATED TO DIRECTOR
NOMINATIONS

     The bylaws contain advance notice procedures with regard to shareholder
proposals related to the nomination of candidates for election as directors.
These procedures provide that notice of shareholder proposals related to
shareholder nominations for the election of directors must be received by our
corporate secretary, in the case of an annual meeting, not less than 90 days nor
more than 120 days prior to the anniversary date of the immediately preceding
annual meeting of shareholders; provided, however, that in the event that the
annual meeting is called for a date that is not within 25 days before or after
that anniversary date, notice by the shareholder in order to be timely must be
received not later than the close of business on the tenth day following the day
on which notice of the date of the annual meeting was mailed or public
disclosure of the date of the annual meeting was made, whichever occurs first.
The procedure for shareholder nominations for the 2003 annual meeting will be
governed by this proviso. Shareholder nominations for the election of directors
at a special meeting must be received by our corporate secretary no later than
the close of business on the tenth day following the day on which notice of the
date of the special meeting was mailed or public disclosure of the date of the
special meeting was made, whichever occurs first.

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     A shareholder's notice to our corporate secretary must be in proper written
form and must set forth some information related to the shareholder giving the
notice, including:

     - the name and record address of that shareholder;

     - the class and series and number of shares of each class and series of our
       capital stock which are owned beneficially or of record by that
       shareholder;

     - a description of all arrangements or understandings between that
       shareholder and any other person in connection with the nomination and
       any material interest of that shareholder in the nomination; and

     - a representation that the shareholder is a holder of record of our stock
       entitled to vote at that meeting and that the shareholder intends to
       appear in person or by proxy at the meeting to bring that nomination
       before the meeting;

and, as to each person whom the shareholder proposes to nominate for election as
a director:

     - the name, age, business and residence addresses, and the principal
       occupation and employment of the person;

     - the class and series and number of shares of each class and series of our
       capital stock which are owned beneficially or of record by the person;
       and

     - any other information relating to the person that would be required to be
       disclosed in a proxy statement or other filings required to be made in
       connection with solicitations of proxies for election of directors
       pursuant to the Securities Exchange Act of 1934, as amended.

  ADVANCE NOTICE REQUIREMENTS FOR OTHER SHAREHOLDER PROPOSALS

     The bylaws contain advance notice procedures with regard to shareholder
proposals not related to nominations. These notice procedures, in the case of an
annual meeting of shareholders, mirror the notice requirements for shareholder
proposals related to director nominations discussed above insofar as they relate
to the timing of receipt of notice by our corporate secretary. In the case of a
special meeting, notice of other shareholder proposals must be received by our
corporate secretary not less than 90 days prior to the date that meeting is
proposed to be held.

     A shareholder's notice to our corporate secretary must be in proper written
form and must set forth, as to each matter that shareholder proposes to bring
before the meeting:

     - a description of the business desired to be brought before the meeting
       and the reasons for conducting that business at the meeting;

     - the name and record address of that shareholder;

     - the class and series and number of shares of each class and series of our
       capital stock which are owned beneficially or of record by that
       shareholder;

     - a description of all arrangements or understandings between that
       shareholder and any other person in connection with the proposal of that
       business and any material interest of that shareholder in that business;
       and

     - a representation that the shareholder is a holder of record of our stock
       entitled to vote at that meeting and that the shareholder intends to
       appear in person or by proxy at the meeting to bring that business before
       the meeting.

  ANTITAKEOVER LEGISLATION

     We are subject to the provisions of Section 33-844 of the CBCA which
prohibits a Connecticut corporation from engaging in a "business combination"
with an "interested shareholder" for a period of five years after the date of
the transaction in which the person became an interested shareholder, unless
                                       116


the business combination is approved in a prescribed manner. A "business
combination" generally includes mergers, asset sales, some types of stock
issuances and other transactions resulting in a disproportionate financial
benefit to the interested shareholder. Subject to exceptions, an "interested
shareholder" is a person who owns, or within five years did own, 10% or more of
our voting power. Under the CBCA, Citigroup, its affiliates and associates are
not considered "interested shareholders" for those purposes.

     The provisions of Section 33-841 and Section 33-842 of the CBCA are not
applicable to us because our certificate of incorporation so provides. These
provisions generally require business combinations with an interested
shareholder to be approved by the board of directors and then by the affirmative
vote of at least:

     - the holders of 80% of the voting power of the outstanding shares of our
       voting stock and

     - the holders of 2/3 of that voting power excluding the voting stock held
       by the interested shareholder,

unless the consideration to be received by the shareholders meets certain price
and other requirements set forth in the CBCA or unless the board of directors of
the corporation has by resolution determined to exempt business combinations
with that interested shareholder prior to the time that such shareholder became
an interested shareholder.

  INSURANCE REGULATIONS CONCERNING CHANGE OF CONTROL

     Many state insurance regulatory laws intended primarily for the protection
of policyholders contain provisions that require advance approval by state
agencies of any change in control of an insurance company or insurance holding
company that is domiciled or, in some cases, having such substantial business
that it is deemed to be commercially domiciled in that state.

  RIGHTS PLAN

     Each share of common stock has attached to it one right. Each right
entitles the holder to purchase one one-thousandth of a share of a new series of
our preferred stock designated as series A junior participating preferred stock
at an exercise price of $   , subject to adjustment. The following summary
description of the rights agreement does not purport to be complete and is
qualified in its entirety by reference to the rights agreement between us and
EquiServe Trust Company, N.A., as rights agent, a copy of which is filed as an
exhibit to the registration statement of which this prospectus is a part and is
incorporated herein by reference.

     Rights will only be exercisable under limited circumstances specified in
the rights agreement when there has been a distribution of the rights and such
rights are no longer redeemable by us. A distribution of the rights would occur
upon the earlier of:

     - 10 business days, or such later date as our board of directors may
       determine, following a public announcement that any person or group,
       other than one involving Citigroup, has acquired beneficial ownership of
       15% or more of the outstanding shares of either class of our common stock
       or of the combined voting power of all our outstanding common stock,
       other than as a result of repurchases of stock by us or through
       inadvertence by certain shareholders as set forth in the rights
       agreement, or

     - 10 business days, or such later date as our board of directors may
       determine, after the date of the commencement or the date of first public
       announcement with respect thereto, whichever is earlier, of a tender
       offer or exchange offer that would result in any person, group or related
       persons acquiring beneficial ownership of 15% or more of the outstanding
       shares of either class of our common stock or of the combined voting
       power of all our outstanding common stock.

     The rights will expire at 5:00 P.M. (New York City time) on
               , 2012, unless such date is extended or the rights are earlier
redeemed or exchanged by us.

     If any person or group acquires shares representing 15% or more of the
combined voting power of all our outstanding common stock, the "flip-in"
provision of the rights agreement will be triggered and the rights will entitle
a holder, other than such person, any member of such group or related person, as
such
                                       117


rights will be null and void, to acquire a number of additional shares of our
common stock having a market value of twice the exercise price of each right. If
we are involved in a merger or other business combination transaction, each
right will entitle its holder to purchase, at the right's then-current exercise
price, a number of shares of the acquiring or surviving company's common stock
having a market value at that time of twice the rights' exercise price.

     Up to and including the tenth business day following a public announcement
that a person or group of affiliated or associated persons has acquired
beneficial ownership of 15% or more of the outstanding shares of either class of
our common stock or of combined voting power of all our outstanding common
stock, other than as a result of repurchases of stock by us, we may redeem the
rights in whole, but not in part, at a price of $.01 per right, payable in cash,
common stock or other consideration that we deemed appropriate. Promptly upon
our election to redeem the rights, the rights will terminate and the only right
of the holders of rights will be to receive the $.01 redemption price.

     At any time after any person or group acquires 15% or more of outstanding
shares of either class of our common stock or of the combined voting power of
all our outstanding common stock, and prior to the acquisition by such person or
group of fifty percent (50%) or more of outstanding shares of either class of
our common stock or of the combined voting power of all our outstanding common
stock, our board of directors may exchange the rights, other than rights owned
by such person, group or related parties which have become void, in whole or in
part, for our common stock at an exchange ratio of          , for holders of our
class A common stock, one share of our Class A common stock, and for holders of
our class B common stock, one share of our class B common stock, respectively,
for one one-thousandth of a share of our series A junior participating preferred
stock of the right, or of a share of a class or series of our preferred stock or
other security having equivalent rights, preferences and privileges, per right,
subject to adjustment.

     Until a right is exercised, the holder of the right, as such, will have no
rights as a shareholder of our company, including, without limitation, no right
to vote or to receive dividends. While the distribution of the rights will not
be taxable to shareholders or to us, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the rights become
exercisable for our common stock or other consideration or for common stock of
the acquiring or surviving company or in the event of the redemption of the
rights as set forth above.

     Any of the provisions of the rights agreement may be amended by our board
of directors prior to the distribution of the rights. After such distribution,
the provisions of the rights agreement may be amended by our board of directors
in order to cure any ambiguity, to make changes which do not adversely affect
the interests of holders of rights or to shorten or lengthen any time period
under the rights agreement. The foregoing notwithstanding, no amendment may be
made at such time as the rights are not redeemable.

     The existence of the rights agreement and the rights is intended to deter
coercive or partial offers which may not provide fair value to all shareholders
and to enhance our ability to represent all of our stockholders and thereby
maximize shareholder value.

CERTIFICATE OF INCORPORATION PROVISIONS RELATING TO CORPORATE OPPORTUNITIES AND
INTERESTED DIRECTORS

     In order to address potential conflicts of interest between us and
Citigroup, the certificate of incorporation contains provisions regulating and
defining the conduct of our affairs as they may involve Citigroup and its
officers and directors, and our powers, rights, duties and liabilities and those
of our officers, directors and shareholders in connection with our relationship
with Citigroup. In general, these provisions recognize that we and Citigroup may
engage in the same or similar business activities and lines of business, have an
interest in the same areas of corporate opportunities and that we and Citigroup
will continue to have contractual and business relations with each other,
including service of officers and directors of Citigroup serving as our
directors.

     Our certificate of incorporation provides that, subject to any contractual
provision to the contrary, Citigroup will have no duty to refrain from:

     - engaging in the same or similar business activities or lines of business
       as us,

     - doing business with any of our clients or customers, or
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     - employing or otherwise engaging any of our officers or employees.

     Under our certificate of incorporation, neither Citigroup nor any officer
or director of Citigroup, except as described in the following paragraph, will
be liable to us or our shareholders for breach of any fiduciary duty by reason
of any such activities. Our certificate of incorporation provides that Citigroup
is not under any duty to present any corporate opportunity to us which may be a
corporate opportunity for Citigroup and us and Citigroup will not be liable to
us or our shareholders for breach of any fiduciary duty as our shareholder by
reason of the fact that Citigroup pursues or acquires that corporate opportunity
for itself, directs that corporate opportunity to another person or does not
present that corporate opportunity to us.

     When one of our directors or officers who is also a director or officer of
Citigroup learns of a potential transaction or matter that may be a corporate
opportunity for both us and Citigroup, the certificate of incorporation provides
that the director or officer:

     - will have fully satisfied his or her fiduciary duties to us and our
       shareholders with respect to that corporate opportunity,

     - will not be liable to us or our shareholders for breach of fiduciary duty
       by reason of Citigroup's actions with respect to that corporate
       opportunity,

     - will be deemed to have acted in good faith and in a manner he or she
       believed to be in, and not opposed to, our best interests for purposes of
       our certificate of incorporation, and

     - will be deemed not to have breached his or her duty of loyalty to us or
       our shareholders and not to have derived an improper personal benefit
       therefrom for purposes of our certificate of incorporation,

if he or she acts in good faith in a manner consistent with the following
policy:

     - a corporate opportunity offered to any of our officers who is also a
       director but not an officer of Citigroup will belong to us, unless that
       opportunity is expressly offered to that person solely in his or her
       capacity as a director of Citigroup, in which case that opportunity will
       belong to Citigroup;

     - a corporate opportunity offered to any of our directors who is not one of
       our officers and who is also a director or an officer of Citigroup will
       belong to us only if that opportunity is expressly offered to that person
       solely in his or her capacity as our director, and otherwise will belong
       to Citigroup; and

     - a corporate opportunity offered to any of our officers who is also an
       officer of Citigroup will belong to Citigroup, unless that opportunity is
       expressly offered to that person solely in his or her capacity as our
       officer, in which case that opportunity will belong to us.

     For purposes of the certificate of incorporation, "corporate opportunities"
include business opportunities that we are financially able to undertake, that
are, from their nature, in our line of business, are of practical advantage to
us and are ones in which we have an interest or a reasonable expectancy, and in
which, by embracing the opportunities, the self-interest of Citigroup or its
officers or directors will be brought into conflict with our self-interest.

     The certificate of incorporation also provides that no contract, agreement,
arrangement or transaction between us and Citigroup will be void or voidable
solely for the reason that Citigroup is a party to such agreement and Citigroup:

     - will have fully satisfied and fulfilled its fiduciary duties to us and
       our shareholders with respect to the contract, agreement, arrangement or
       transaction,

     - will not be liable to us or our shareholders for breach of fiduciary duty
       by reason of entering into, performance or consummation of any such
       contract, agreement, arrangement or transaction,

     - will be deemed to have acted in good faith and in a manner it reasonably
       believed to be in, and not opposed to, the best interests of us for
       purposes of the certificate of incorporation, and

     - will be deemed not to have breached its duties of loyalty to us and our
       shareholders and not to have derived an improper personal benefit
       therefrom for purposes of the certificate of incorporation,

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if:

     - the material facts as to the contract, agreement, arrangement or
       transaction are disclosed or are known to our board of directors or the
       committee of our board that authorizes the contract, agreement,
       arrangement or transaction and our board of directors or that committee
       in good faith authorizes the contract, agreement, arrangement or
       transaction by the affirmative vote of a majority of the disinterested
       directors;

     - the material facts as to the contract, agreement, arrangement or
       transaction are disclosed or are known to the holders of our shares
       entitled to vote on such contract, agreement, arrangement or transaction
       and the contract, agreement, arrangement or transaction is specifically
       approved in good faith by vote of the holders of a majority of the votes
       entitled to be cast by the holders of the common stock then outstanding
       not owned by Citigroup or a related entity; or

     - the transaction, judged according to the circumstances at the time of the
       commitment, is established to have been fair to us.

     Any person purchasing or otherwise acquiring any interest in any shares of
our capital stock will be deemed to have consented to these provisions of the
certificate of incorporation.

     Until the time that Citigroup ceases to be entitled to 20% or more of the
votes entitled to be cast, the affirmative vote of the holders of at least 80%
of the votes entitled to be cast is required to alter, amend or repeal, or adopt
any provision inconsistent with the corporate opportunity and interested
director provisions described above; however, after Citigroup no longer owns
shares for its own account entitling it to cast at least 20% of the votes
entitled to be cast by the then outstanding common stock, any such alteration,
adoption, amendment or repeal would be approved if a quorum is present and the
votes favoring the action exceed the votes opposing it. Accordingly, until such
time, so long as Citigroup controls at least 20% of the votes entitled to be
cast, it can prevent any such alteration, adoption, amendment or repeal.

PROVISIONS RELATING TO CONTROL BY CITIGROUP

     Our certificate of incorporation provides that until Citigroup ceases to
beneficially own shares entitled to 20% or more of the votes entitled to be cast
by then outstanding common stock, the prior consent of the holders of a majority
of the class B common stock then outstanding, will be required for:

     - any consolidation or merger of us or any of our subsidiaries with any
       person, other than a subsidiary;

     - any sale, lease, exchange or other disposition or any acquisition by us,
       other than transactions between us and our subsidiaries, or any series of
       related dispositions or acquisitions, involving consideration in excess
       of $50 million;

     - any change in our authorized capital stock or our creation of any class
       or series of capital stock;

     - the issuance by us or one of our subsidiaries of any equity securities or
       equity derivative securities, except:

      - the issuance of shares by one of our subsidiaries to us or another of
        our subsidiaries;

      - in connection with the offerings, the corporate reorganization and the
        distribution; and

      - employee and agent stock incentive awards in the ordinary course of
        business;

     - our dissolution;

     - the amendment of various provisions of our certificate of incorporation
       and bylaws;

     - any change in our chief executive officer;

     - the declaration of dividends on any class of our capital stock, except
       for our regular quarterly dividends at the rate described under "Dividend
       Policy" in this prospectus;

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     - the creation or incurrence or guaranty by us of indebtedness in excess of
       $100 million, except:

      - in connection with the offering of our convertible notes,

      - under our credit agreements with Citigroup, and

      - under guarantees given to states or insurance regulatory authorities in
        connection with the licensing of our business;

     - any change in the number of directors on our board of directors, the
       establishment of any committee of the board, the determination of the
       members of the board or any committee of the board, and the filling of
       newly created memberships and vacancies on the board or any committee of
       the board; and

     - transactions with our affiliates, other than Citigroup, involving
       consideration in excess of $5 million, other than transactions on terms
       substantially the same as or more favorable to us than those that would
       be available from an unaffiliated third party and other than transactions
       between or among any of our subsidiaries.

     Until the time that Citigroup ceases to be entitled to 20% or more of the
votes entitled to be cast, the affirmative vote of the holders of at least 80%
of the votes entitled to be cast is required to alter, amend or repeal, or adopt
any provision inconsistent with the control provisions described above; however,
after Citigroup no longer owns shares for its own account entitling it to cast
at least 20% of the votes entitled to be cast by the holders of the then
outstanding common stock, any such alteration, adoption, amendment or repeal
would be approved if a quorum is present and the votes favoring the action
exceed the votes opposing it. Accordingly, until such time, so long as Citigroup
controls at least 20% of the votes entitled to be cast, it can prevent any such
alteration, adoption, amendment or repeal.

PROVISIONS RELATING TO REGULATORY STATUS

     The certificate of incorporation also contains provisions regulating and
defining the conduct of our affairs as they may affect Citigroup and its legal
and regulatory status. In general, the certificate of incorporation provides
that, without the written consent of Citigroup, we will not take any action that
would result in:

     - Citigroup's being required to file any document with, register with,
       obtain the authorization of, or otherwise become subject to any rules,
       regulations or other legal restrictions of any governmental,
       administrative or regulatory authority, or

     - any of our directors of who is also a director or officer of Citigroup
       being ineligible to serve or prohibited from serving as our director
       under applicable law.

     The certificate of incorporation further provides that Citigroup will not
be liable to us or our shareholders for breach of any fiduciary duty by reason
of the fact that Citigroup gives or withholds any such consent for any reason.

     Any persons purchasing or otherwise acquiring any interest in shares of our
capital stock will be deemed to have consented to these provisions of the
certificate of incorporation.

     Until the time that Citigroup ceases to be entitled to 20% or more of the
votes entitled to be cast by the then outstanding common stock, the affirmative
vote of the holders of at least 80% of the votes entitled to be cast is required
to alter, amend or repeal, or adopt any provision inconsistent with, the
provision of the certificate of incorporation described above; however, the
provision relating to legal and regulatory status automatically becomes
inoperative six months after Citigroup ceases to be entitled to at least 20% of
the votes entitled to be cast by the then outstanding common stock relating to
shares held for its own account. Accordingly, until such time, so long as
Citigroup controls at least 20% of the votes entitled to be cast, it can prevent
any alteration, adoption, amendment or repeal of that provision.

                                       121


     The Connecticut courts have not conclusively determined the validity or
enforceability of provisions similar to the corporate opportunity, interested
director and legal and regulatory status provisions that are included in our
certificate of incorporation and could rule that some liabilities which those
provisions purport to eliminate remain in effect.

LIMITATION OF LIABILITY OF DIRECTORS

     The certificate of incorporation contains provisions permitted under the
CBCA relating to the personal liability of directors. The provisions limit the
personal liability to us or our shareholders of a director for monetary damages
for breach of duty as a director to an amount that is not more than the
compensation received by that director for serving us during the year of the
violation, if such breach did not:

     - involve a knowing and culpable violation of law by the director;

     - enable the director or an associate to receive an improper personal
       economic gain;

     - show a lack of good faith and a conscious disregard for the duty of the
       director to us under circumstances in which he or she was aware that his
       or her conduct or omission created an unjustified risk of serious injury
       to us;

     - constitute a sustained and unexcused pattern of inattention that amounted
       to an abdication of his or her duty to us; or

     - create liability for an unlawful distribution under the CBCA.

     Our certificate of incorporation or bylaws provides for indemnification of
directors and officers to the fullest extent permitted by Connecticut law.

LISTING

     We have applied to list the class A common stock on the NYSE under the
trading symbol "TAP.A."

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the common stock will be EquiServe
Trust Company, N.A.

                                       122


                            DESCRIPTION OF THE NOTES

     Concurrently with this offering, we are offering $850 million aggregate
principal amount of our   % convertible junior subordinated notes due 2032, plus
up to an additional $42.5 million aggregate principal amount of notes if the
over-allotment option for that offering is exercised in full.

GENERAL

     The notes will be limited in aggregate principal amount to $892.5 million.
The notes will mature on April   , 2032, unless earlier redeemed, repurchased or
converted. We will pay interest on the notes quarterly in arrears at the rate of
  % per year on January   , April   , July   and October   of each year,
commencing on July   , 2002.

DEFERRAL OF INTEREST PAYMENTS ON THE NOTES

     We have the option to defer interest payments on the notes for a period not
exceeding 20 consecutive interest periods. We cannot, however, defer interest
payments beyond the maturity of the notes. During a deferral period, the amount
of interest due to holders of the notes will continue to accumulate and such
deferred interest payments will themselves accrue interest.

     If we exercise our right to extend an interest payment period, we will not
be permitted to:

     - declare or pay a dividend or make any distribution on our capital stock
       or redeem, purchase, acquire or make a liquidation payment on any of our
       capital stock, or make any guarantee payments relating to the foregoing,
       except, in each case, under limited circumstances; or

     - make an interest, principal or premium payment on, or repurchase or
       redeem, any of our debt securities that rank equal with or junior to the
       notes.

CONVERSION


     Unless previously redeemed or repurchased, the notes are convertible into
shares of our class A common stock at the option of the holders at any time
after April   , 2003 and prior to 5:00 p.m., New York City time, on          ,
2032 if at any time (1) the average of the daily closing prices of our class A
common stock for the 20 consecutive trading days immediately prior to the
conversion date is at least 20% above the conversion price on the conversion
date, (2) the notes have been called for redemption, (3) specified corporate
transactions have occurred or (4) specified credit rating events with respect to
the notes have occurred. The notes will be convertible into shares of our class
A common stock at a conversion rate of          shares of class A common stock
for each $25 principal amount of notes (equivalent to an initial conversion
price of $          per share of class A common stock), subject to adjustment in
certain events. From April   , 2003, and until the next business day following
the date of the distribution (provided that the distribution has not occurred by
April   , 2003), we may elect to make a cash settlement in respect of any notes
surrendered for conversion. The amount of cash that we will pay if we elect a
cash settlement will be equal to the value of the underlying shares of class A
common stock. The right to convert notes that have been called for redemption
will terminate at the close of business on the business day immediately
preceding the date of redemption. No fractional shares of class A common stock
will be issued as a result of conversion. Instead, fractional interests will be
paid in cash.


OPTIONAL REDEMPTION

     On or after April   , 2007, at any time or from time to time, upon not less
than 30 nor more than 60 days' notice, the notes may be redeemed at our option,
in whole or in part, in cash at the redemption prices set forth in the notes
prospectus, together with any accrued and unpaid interest to, but excluding, the
redemption date.

     We are not required to make mandatory redemption or sinking fund payments
with respect to the notes.

                                       123


RANKING

     The notes are our general unsecured obligations and are subordinated in
right of payment to all of our existing and future Senior Indebtedness (as
defined in the indenture in respect of the notes) to the extent set forth in the
indenture. The notes are also effectively subordinated to all existing and
future indebtedness and other liabilities of any of our current or future
subsidiaries. The indenture does not limit the amount of other indebtedness or
liabilities that we or our subsidiaries may incur or securities that we or our
subsidiaries may issue in the future.

TRADING


     We will apply to list the notes on the New York Stock Exchange under the
symbol "TPK." Our class A common stock is expected to be listed on the New York
Stock Exchange under the symbol "TAP.A."


                                       124


                              CERTAIN INDEBTEDNESS

NOTES PAYABLE TO AFFILIATES

     In conjunction with the purchase of TIGHI's outstanding shares in April
2000, we borrowed $2.2 billion under a prior note agreement with Citigroup. At
December 31, 2001, the outstanding balance of this note payable to Citigroup was
$1.2 billion. Interest expense included in our consolidated statement of income
was $79 million in 2001 and $113 million in 2000. On February 7, 2002, the prior
note agreement was replaced by a new note agreement. The outstanding principal
under the new note agreement accrues interest at Citicorp's commercial paper
rate plus 10 basis points per annum. The outstanding principal under the new
note agreement is expected to be approximately $1.1 billion at the time of
completion of this offering, all or a portion of which may be paid out of the
proceeds of this offering.

     On December 19, 2001, we entered into a $250 million revolving line of
credit with Citigroup. The line, which replaced an expiring line of credit from
a syndicate of banks, expires in December 2006. We pay Citigroup a commitment
fee, and if we borrow under this line, the interest rate will be based on the
cost of commercial paper issued by Citicorp. At December 31, 2001, we had no
loans outstanding under the line of credit.

     We issue commercial paper directly to investors and maintain unused credit
availability under the credit facility at least equal to the amount of
commercial paper obligations outstanding. At December 31, 2001, there were no
commercial paper obligations outstanding.


     On April 13, 2001, we entered into a $500 million line of credit agreement
with Citigroup. This line of credit expires in December 2006. On April 16, 2001,
we borrowed $275 million on the line of credit. Proceeds from this borrowing
together with $225 million of commercial paper proceeds were used to pay a $500
million 6.75% long-term note payable. On November 8, 2001, we borrowed another
$225 million on this line of credit. This borrowing, the proceeds of which were
used to pay off maturing commercial paper, brought the total borrowing under
this line to $500 million as of December 31, 2001. The loan matures in November
2003 and has an interest rate of 3.60%.


     The debt financing arrangements with Citigroup summarized above were
entered into in the context of a parent-subsidiary relationship, and while
management believes the terms of these arrangements are market-based, they do
not necessarily reflect terms that would have been obtained in arm's-length
negotiations between unrelated parties.

     In February 2002, our board of directors declared a dividend of $1.0
billion to Citigroup in the form of a non-interest bearing note payable on
December 31, 2002. We expect to repay this note from future earnings, to the
extent available.

     In February 2002, our board of directors also declared a dividend of $3.7
billion to Citigroup in the form of a $3.7 billion note payable two
installments. The first installment of $150 million will be payable on May 9,
2004 and the second installment of $3.55 billion will be payable on February 7,
2017. This note begins to bear interest after May 9, 2002 at a rate of 7.25% per
annum. This note may be prepaid at any time in whole or in part without penalty
or premium. We expect that substantially all of this note will be prepaid with
the proceeds of the offerings. See "Use of Proceeds."

MANDATORILY REDEEMABLE SECURITIES OF SUBSIDIARY TRUSTS; JUNIOR SUBORDINATED DEBT
SECURITIES

     TIGHI has formed statutory business trusts under the laws of the state of
Delaware, which exist for the exclusive purposes of:

     - issuing trust securities representing undivided beneficial interests in
       the assets of the trust;

     - investing the gross proceeds of the trust securities in junior
       subordinated deferrable interest debentures of TIGHI; and

     - engaging in only those activities necessary or incidental to the purposes
       listed above.

                                       125


     These junior subordinated debentures and the related income effects are
eliminated in our consolidated financial statements.

     In 1996, two of these trusts issued $900 million aggregate liquidation
value of mandatorily redeemable securities, comprised of an aggregate of 36
million TIGHI trust securities, each with a $25 liquidation value. The trusts
have no significant assets, other than TIGHI's junior subordinated debentures,
and the trust securities are effectively fully and unconditionally guaranteed by
TIGHI. The TIGHI trust securities accrue distributions at 8.0% and 8.08% per
annum, respectively, payable quarterly in arrears. The TIGHI trust securities
mature in 2036 and are currently redeemable by TIGHI at 100% of their
liquidation value. TIGHI has the right, at any time, to defer payments of
distributions on the TIGHI trust securities, though such distributions would
continue to accrue with interest. TIGHI cannot pay dividends on its common stock
during those deferments.

     The junior subordinated debentures are now redeemable by us, in whole or in
part, from time to time. If TIGHI redeems the debentures, the related TIGHI
trust must redeem the trust securities having an aggregate liquidation amount
equal to the aggregate principal amount of the debentures so redeemed plus
accrued and unpaid distributions to the date fixed for redemption. In addition,
upon the occurrence of certain events arising from a change in law or a change
in legal interpretation regarding tax or investment company matters, unless the
debentures are redeemed under limited circumstances, the related TIGHI trust
will be dissolved, with the result that the debentures will be distributed to
the holders of the TIGHI trust securities of the applicable TIGHI trust, on a
pro rata basis, in lieu of any cash distribution.

     In the event of the involuntary or voluntary dissolution, winding up or
termination of a TIGHI trust, the holders of the related trust securities will
be entitled to receive for each trust security, a liquidation amount of $25 plus
accrued and unpaid distributions thereon, including interest on that security to
the date of payment, unless, in connection with that dissolution, the related
debentures are distributed to the holders of the related trust securities.

LONG-TERM DEBT

     In April 1996, TIGHI sold $200 million of 7.75% notes due April 15, 2026,
in a public offering, in connection with the acquisition of Aetna P&C. In
November 1996, TIGHI sold $150 million of 6.75% notes due November 15, 2006, in
a public offering.

     These notes which were issued under an indenture dated April 19, 1996
between TIGHI and Citibank, N.A., constitute unsecured senior indebtedness of
TIGHI, ranking the same as TIGHI's obligations under all other unsubordinated
unsecured indebtedness and senior in right of payment to all existing and future
subordinated indebtedness of TIGHI. The notes are not subject to redemption
prior to maturity or to any sinking fund. The indenture contains covenants that,
among other things, limit the ability of TIGHI and its subsidiaries to incur
indebtedness secured by voting stock of its subsidiaries and limit TIGHI's
ability to engage in mergers, consolidations and sales of substantially all of
its assets.

     In connection with our concurrent offering, we will issue $850 million
aggregate principal amount of our convertible notes, plus up to an additional
$42.5 million aggregate principal amount of notes if the over-allotment option
for that offering is exercised in full.

                                       126


                        SHARES ELIGIBLE FOR FUTURE SALE

     We can make no prediction as to the effect, if any, that market sales of
shares of common stock or the availability of shares of common stock for sale
will have on the market price prevailing from time to time. We also cannot
predict the effect Citigroup's planned tax-free distribution will have on the
market price prevailing from time to time. The sale of substantial amounts of
common stock in the public market, the perception that such sales could occur or
the tax-free distribution could adversely affect the prevailing market price of
the common stock and our ability to raise equity capital in the future.
Application will be made to list our class A common stock on the NYSE under the
symbol "TAP.A."

SALE OF RESTRICTED SHARES

     Upon completion of this offering, we will have outstanding 500,000,000
shares of class A common stock and 500,000,000 shares of class B common stock.
All of the shares of common stock sold in the offering will be freely tradable
without restriction or further registration under the Securities Act, except
that any shares purchased by or owned by our "affiliates," as that term is
defined in Rule 144 under the Securities Act, may generally only be sold in
compliance with the limitations of Rule 144 described below. As defined in Rule
144, an affiliate of an issuer is a person that directly, or indirectly through
one or more intermediaries, controls, is controlled by or is under common
control with the issuer. Shares held by affiliates may not be resold in the
absence of registration under the Securities Act or pursuant to an exemption
from registration, including, among others, the exemption provided by Rule 144
under the Securities Act. Citigroup has informed us that by year-end 2002 it
plans to make a tax-free distribution to its stockholders of a portion of its
ownership interest in us, which, together with the shares being issued in this
offering, will represent approximately 90.1% of our common equity (more than 90%
of the combined voting power of our then outstanding voting securities).
Substantially all of these shares would be eligible for immediate resale in the
public market. We are unable to predict whether significant numbers of shares
will be sold in the open market in anticipation of or following this
distribution.

RULE 144

     In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year, including a
person who is an affiliate, is entitled to sell within any three-month period a
number of shares that does not exceed the greater of:

     - 1% of the number of shares of common stock then outstanding; or

     - the average weekly trading volume of the common stock on the NYSE during
       the four calendar weeks preceding the filing of a notice on Form 144 with
       respect to a sale, subject to restrictions specified in Rule 144.

Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about us.

RULE 144(k)

     Under Rule 144(k), a person who has not been one of our affiliates at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell those
shares without regard to the volume, manner-of-sale or other limitations
contained in Rule 144.

LOCK-UP AGREEMENTS

     We, our officers and directors and Citigroup have agreed that, for a period
of 180 days from the date of this prospectus, we and they will not, without the
prior written consent of Salomon Smith Barney, dispose of or hedge any shares of
our common stock or any securities convertible into or exchangeable for our
common stock. The participants in the directed share program have agreed to a
similar lock-up, but for a period of 60 days for 401(k) Plan participants, 180
days for directors, officers and employees, and 365 days for independent agents.
However, we may issue our convertible notes in the concurrent offering and
shares of class A common stock upon conversion of the notes, we may issue shares
of common stock in connection with our corporate reorganization, and we may
grant options to purchase shares of common

                                       127


stock and issue shares of common stock upon the exercise of outstanding options
under our stock option plans. We may also issue restricted stock pursuant to our
stock incentive plan. In addition, we may issue or sell common stock in
connection with an acquisition or business combination, and Citigroup may
privately transfer shares of common stock, as long as the acquiror of that
common stock agrees in writing to be bound by the obligations and restrictions
of our lock-up agreement for the remainder of the 180-day period.

REGISTRATION RIGHTS

     Pursuant to the intercompany agreement, Citigroup can require us to effect
the registration under the Securities Act of shares of our common stock that it
will continue to own after the offering. See "Arrangements Between Our Company
and Citigroup."

                                       128


       CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS

     The following is a summary of the material United States federal income tax
considerations that may be relevant to a holder of our common stock. The summary
is based on

     - laws;

     - regulations;

     - rulings; and

     - decisions now in effect,

all of which may change, possibly with retroactive effect. This summary deals
only with persons that are not "United States holders," and who will hold their
common stock as a capital asset. A "United States holder" is an owner of common
stock who is:

     - a citizen or resident of the United States;

     - a corporation or other entity treated as a corporation for U.S. federal
       income tax purposes, in each case, that is created or organized in or
       under the laws of the United States or any political subdivision of the
       United States;

     - an estate, if United States federal income taxation is applicable to the
       income of that estate regardless of the income's source; or

     - a trust, if a United States court is able to exercise primary supervision
       over the trust's administration and one or more United States persons
       have the authority to control all of the trust's substantial decisions.

     This summary does not address tax considerations applicable to non-United
States holders to whom special tax rules may apply, including:

     - banks;

     - tax-exempt entities;

     - insurance companies;

     - common trust funds;

     - dealers in securities or currencies;

     - entities that are treated as partnerships for U.S. federal income tax
       purposes;

     - persons that will hold more than 5% of our outstanding common stock; or

     - persons that will hold the common stock as part of an integrated
       investment, including a straddle or conversion transaction, comprised of
       the common stock and one or more other positions.

     You should consult your tax advisor in determining the tax consequences to
you of purchasing, holding and disposing of the common stock, including the
application to your particular situation of the United States federal income tax
considerations discussed below, as well as the application of state, local,
foreign or other tax laws.

DIVIDENDS

     Distributions on our common stock will constitute dividends to the extent
of our current or accumulated earnings and profits as determined for United
States federal income tax purposes.

     Dividends, if any, paid to you generally will be subject to a 30% United
States federal withholding tax, subject to reduction if you are eligible for the
benefits of an applicable income tax treaty. However, except to the extent
otherwise provided in an applicable tax treaty, dividends that are effectively
connected to your conduct of a trade or business within the United States will
be taxed at graduated ordinary federal income tax rates, and if you are a
corporation, you may be subject to a branch profits tax which is generally
imposed on a foreign corporation on the repatriation from the United States of
effectively connected earnings and profits. You should consult any applicable
tax treaties which may provide for a lower rate of withholding or other rules
different than those described above. You will not be entitled to a
                                       129


reduction in or an exemption from United States federal withholding tax if the
payor or agent knows or has reason to know that you are not entitled to a
reduction or exemption.

SALE OR DISPOSITION OF COMMON STOCK

     You generally will not be subject to United States federal income tax on
any gain recognized on the sale, exchange, redemption or other taxable
disposition of our common stock unless:

     - you are an individual present in the United States for 183 days or more
       in the year of that sale, exchange or redemption and certain other
       requirements are met; or

     - the income or gain is "U.S. trade or business income," which means income
       or gain that is effectively connected with your conduct of a trade or
       business in the United States or, if you are a treaty resident,
       attributable to a permanent establishment or a fixed base in the United
       States.

BACKUP WITHHOLDING AND INFORMATION REPORTING

     In general, backup withholding and information reporting will not apply to
dividends on our common stock made by us or our paying agents, in their
capacities as such, to a non-U.S. holder, or to proceeds from the disposition of
common stock paid to a non-U.S. holder, in each case if the holder has provided
the required certification that it is a non-U.S. holder and neither we nor our
paying agent has actual knowledge that the holder is a U.S. holder.

     THE DESCRIPTION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY
AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK, INCLUDING THE
TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.

                                       130


                                  UNDERWRITING

     The global offering consists of

     - an offering of a total of 168,000,000 shares in the United States and
       Canada, and

     - an offering of a total of 42,000,000 shares outside the United States and
       Canada.

     Salomon Smith Barney is the global coordinator and sole bookrunning manager
of the global offering. Salomon Smith Barney Inc., Credit Suisse First Boston
Corporation, Goldman, Sachs & Co., Lehman Brothers Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated are acting as
representatives of the U.S. underwriters named below. Salomon Brothers
International Limited, Credit Suisse First Boston (Europe) Limited, Deutsche
Bank AG London, Goldman Sachs International, Lehman Brothers International
(Europe), Merrill Lynch International, Morgan Stanley & Co. International Ltd
and UBS AG, acting through its business group UBS Warburg, are acting as
representatives of the international underwriters named below.

     Subject to the terms and conditions stated in the U.S. underwriting
agreement dated the date of this prospectus, each U.S. underwriter named below
has agreed to purchase, and we have agreed to sell to that underwriter, the
number of shares set forth opposite the U.S. underwriter's name.



                                                                  NUMBER
                        UNDERWRITER                              OF SHARES
                        -----------                             -----------
                                                             
Salomon Smith Barney Inc. ..................................
Credit Suisse First Boston Corporation......................
Goldman, Sachs & Co. .......................................
Lehman Brothers Inc. .......................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
Morgan Stanley & Co. Incorporated...........................
Banc of America Securities LLC..............................
Bear, Stearns & Co. Inc. ...................................
Blaylock & Partners, L.P. ..................................
Deutsche Banc Alex. Brown Inc. .............................
Fox-Pitt, Kelton Inc. ......................................
J.P. Morgan Securities Inc. ................................
Neuberger Berman LLC........................................
UBS Warburg LLC.............................................
The Williams Capital Group, L.P. ...........................
                                                                -----------
     Total..................................................    168,000,000
                                                                ===========


     Subject to the terms and conditions stated in the international
underwriting agreement dated the date of this prospectus, each international
underwriter named below has agreed to purchase, and we have agreed to sell to
that underwriter, the number of shares set forth opposite the international
underwriter's name.

                                       131




                                                                  NUMBER
                        UNDERWRITER                              OF SHARES
                        -----------                             -----------
                                                             
Salomon Brothers International Limited......................
Credit Suisse First Boston (Europe) Limited.................
Deutsche Bank AG London.....................................
Goldman Sachs International.................................
Lehman Brothers International (Europe)......................
Merrill Lynch International.................................
Morgan Stanley & Co. International Ltd......................
UBS AG, acting through its business group UBS Warburg.......
BBVA Bolsa Sociedad de Valores, S.A. .......................
BNP Paribas.................................................
Cazenove & Co. Ltd..........................................
CDC IXIS Capital Markets....................................
Credit Lyonnais Securities .................................
Dresdner Kleinwort Wasserstein Securities Limited...........
ING Barings Limited as agent for ING Bank N.V., London
  Branch....................................................
MEDIOBANCA -- Banca di Credito Finanziario S.p.A. ..........
Santander Central Hispano Investment, S.A. .................
WestLB Panmure Limited......................................
ABN AMRO Rothschild.........................................
Barclays Bank Plc...........................................
Commerzbank Aktiengesellschaft, London Branch...............
Credit Agricole Indosuez....................................
Daiwa Securities SMBC Europe Limited........................
Fortis Bank (Nederland) N.V. ...............................
Fox-Pitt, Kelton N.V. ......................................
HSBC Investment Bank plc....................................
IntesaBci S.p.A. ...........................................
Societe Generale............................................
Unicredit Banca Mobiliare Societa per Azioni................
                                                                -----------
          Total.............................................     42,000,000
                                                                ===========


     The U.S. and international underwriting agreements provide that the
obligations of the underwriters to purchase the shares included in this offering
are subject to approval of legal matters by counsel and to other conditions. The
underwriters are obligated to purchase all the shares (other than those covered
by the over-allotment option described below) if they purchase any of the
shares. The offering price and the total underwriting discounts and commissions
per share for the U.S. offering and the international offering are identical,
except as described below in connection with the directed share program. In
addition, the U.S. and the international offerings are each conditional on the
closing of the other.

     The underwriters propose to offer some of the shares directly to the public
at the public offering price set forth on the cover page of this prospectus and
some of the shares to dealers at the public offering price less a concession not
to exceed $     per share. The underwriters may allow, and the dealers may
reallow, a concession not to exceed $     per share on sales to other dealers.
If all of the shares are not sold at the initial offering price, the
representatives may change the public offering price and the other selling
terms. The representatives have advised us that the underwriters do not intend
to confirm any sales to any accounts over which they exercise discretionary
authority.

     We have granted to the U.S. underwriters an option, exercisable for 30 days
from the date of this prospectus, to purchase up to                additional
shares of class A common stock at the public

                                       132


offering price less the underwriting discount. The U.S. underwriters may
exercise the option solely for the purpose of covering over-allotments, if any,
in connection with this offering. To the extent the option is exercised, each
U.S. underwriter must purchase a number of additional shares approximately
proportionate to that underwriter's initial purchase commitment. We have also
granted to the international underwriters an option to purchase up to an
aggregate of                additional shares on the same terms and conditions.
If the U.S. and international underwriters' options are exercised in full, the
total price to the public for this offering would be $               , the total
underwriting discounts would be $               and the total net proceeds to us
would be approximately $               billion.

     The underwriters for each of the offerings have entered into an agreement
in which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares. The U.S. and international underwriters
also have agreed that they may sell shares between their respective underwriting
syndicates. The number of shares actually allocated to each offering may differ
from the amount offered due to reallocation between the U.S. and international
offerings.

     We, our officers and directors and Citigroup have agreed that, for a period
of 180 days from the date of this prospectus, we and they will not, without the
prior written consent of Salomon Smith Barney, dispose of or hedge any shares of
our common stock or any securities convertible into or exchangeable for our
common stock. However, we may issue our convertible notes in the concurrent
offering and shares of class A common stock upon conversion of the notes, we may
issue shares of common stock in connection with our corporate reorganization,
and we may grant options to purchase shares of common stock and issue shares of
common stock upon the exercise of outstanding options under our stock option
plans. We may also issue restricted shares of common stock pursuant to our stock
incentive plan. In addition, we may issue or sell common stock in connection
with an acquisition or business combination, and Citigroup may privately
transfer shares of common stock, as long as the acquiror of that common stock
agrees in writing to be bound by the obligations and restrictions of our lock-up
agreement for the remainder of the 180-day period.


     At our request, the underwriters have reserved up to 2% of the shares of
class A common stock for sale through a directed share program at the initial
public offering price less an underwriting discount of 3% to persons who are
directors, officers or employees, or independent agents who sell our products.
Robert Lipp, our chairman and chief executive officer, has advised us that he
intends to purchase $15 million of class A common stock in the directed share
program. The number of shares of class A common stock available for sale to the
general public will be reduced by the number of directed shares purchased by
participants in the program. Any directed shares not purchased will be offered
by the underwriters to the general public on the same basis as all other shares
of class A common stock offered. We have agreed to indemnify the underwriters
against certain liabilities and expenses, including liabilities under the
Securities Act, in connection with the sales of the directed shares. We and the
participants in the directed share program have agreed that, for a period of 60
days for 401(k) Plan participants, 180 days for directors, officers and
employees purchasing for their own account, and 365 days for independent agents,
in each case from the date of this prospectus, they will not, without the prior
written consent of Salomon Smith Barney Inc., dispose of or hedge any shares of
our common stock or any securities convertible into or exchangeable for our
common stock.


     Prior to this offering, there has been no public market for our class A
common stock. Consequently, the initial public offering price for the shares
will be determined by negotiations among us and the representatives. Among the
factors to be considered in determining the initial public offering price will
be our record of operations, our current financial condition, our future
prospects, our markets, the economic conditions in and future prospects for the
industry in which we compete, our management and currently prevailing general
conditions in the equity securities markets, including current market valuations
of publicly traded companies considered comparable to our company. We cannot
assure you, however, that the prices at which the shares will sell in the public
market after this offering will not be lower than the initial public offering
price or that an active trading market in our class A common stock will develop
and continue after this offering.

                                       133


     We have applied to list our class A common stock on the New York Stock
Exchange under the symbol "TAP.A." The underwriters will undertake to sell
shares of class A common stock to a minimum of 2,000 beneficial owners in lots
of 100 or more shares to meet the New York Stock Exchange distribution
requirements for trading.

     The following table shows the underwriting discounts and commissions that
we are to pay to the underwriters in connection with this offering. These
amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of class A common stock.



                                                                             PAID BY
                                                                TRAVELERS PROPERTY CASUALTY CORP.
                                                                ----------------------------------
                                                                NO EXERCISE         FULL EXERCISE
                                                                ------------        --------------
                                                                              
Per share...................................................      $                    $
Total.......................................................      $                    $


     In connection with the offering, Salomon Smith Barney Inc. on behalf of the
underwriters may purchase and sell shares of class A common stock in the open
market. These transactions may include short sales, syndicate covering
transactions and stabilizing transactions. Short sales involve syndicate sales
of common stock in excess of the number of shares to be purchased by the
underwriters in the offering, which creates a syndicate short position.
"Covered" short sales are sales of shares made in an amount up to the number of
shares represented by the underwriters' over-allotment option. In determining
the source of shares to close out the covered syndicate short position, the
underwriters will consider, among other things, the price of shares available
for purchase in the open market as compared to the price at which they may
purchase shares through the over-allotment option. Transactions to close out the
covered syndicate short involve either purchases of the common stock in the open
market after the distribution has been completed or the exercise of the
over-allotment option. The underwriters may also make "naked" short sales of
shares in excess of the over-allotment option. The underwriters must close out
any naked short position by purchasing shares of common stock in the open
market. A naked short position is more likely to be created if the underwriters
are concerned that there may be downward pressure on the price of the shares in
the open market after pricing that could adversely affect investors who purchase
in the offering. Stabilizing transactions consist of bids for or purchases of
shares in the open market while the offering is in progress.

     The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney repurchases shares originally sold by that syndicate member
in order to cover syndicate short positions or make stabilizing purchases.

     Any of these activities may have the effect of preventing or retarding a
decline in the market price of the class A common stock. They may also cause the
price of the class A common stock to be higher than the price that would
otherwise exist in the open market in the absence of these transactions. The
underwriters may conduct these transactions on the New York Stock Exchange or in
the over-the-counter market, or otherwise. If the underwriters commence any of
these transactions, they may discontinue them at any time.

     Because Salomon Smith Barney is a member of the NYSE and because of its
relationship to us, it will not be permitted under the rules of the NYSE to
solicit the purchase or sale of our shares or make recommendations regarding the
purchase or sale of our shares. This may harm the trading market for the shares.
These restrictions will not apply after the tax-free distribution by Citigroup
to its stockholders of its entire ownership interest in us.

     We estimate that our portion of the total expenses of this offering will be
$               .

     Because an affiliate of Salomon Smith Barney Inc. beneficially owns more
than 10% of the class A common stock outstanding prior to the closing of this
offering, it may be deemed to have a "conflict of interest" with us under Rule
2720 of the National Association of Securities Dealers, Inc. When a NASD member
with a conflict of interest participates as an underwriter in a public offering,
that rule requires that the initial public offering price may be no higher than
that recommended by a "qualified independent
                                       134


underwriter," as defined by the NASD. In accordance with this rule, Merrill
Lynch, Pierce, Fenner & Smith Incorporated has assumed the responsibilities of
acting as a qualified independent underwriter. In its role as a qualified
independent underwriter, Merrill Lynch has performed a due diligence
investigation and participated in the preparation of this prospectus and the
registration statement of which this prospectus is a part. Merrill Lynch will
not receive any additional fees for serving as qualified independent underwriter
in connection with this offering. We have agreed to indemnify Merrill Lynch
against liabilities incurred in connection with acting as a qualified
independent underwriter, including liabilities under the Securities Act.

     The underwriters may, from time to time, engage in transactions with and
perform services for us in the ordinary course of their business. See
"Arrangements Between our Company and Citigroup."

     A prospectus in electronic format may be made available on the websites
maintained by one or more of the underwriters. The representatives may agree to
allocate a number of shares to underwriters for sale to their online brokerage
account holders. The representatives will allocate shares to underwriters that
may make Internet distributions on the same basis as other allocations. In
addition, shares may be sold by the underwriters to securities dealers who
resell shares to online brokerage account holders.

     We and Citigroup have agreed to indemnify the underwriters against some
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriters may be required to make because of any
of those liabilities.

                                       135


                                 LEGAL MATTERS


     Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York is
representing us in connection with this offering. The validity of the issuance
of the common stock under Connecticut law will be passed upon for us by Cummings
& Lockwood LLC, Hartford, Connecticut. Simpson Thacher & Bartlett has
participated in representing us in connection with the offering and has passed
on certain matters for us. The underwriters are being represented by Cleary,
Gottlieb, Steen & Hamilton, New York, New York. Kenneth J. Bialkin, a partner of
Skadden, Arps, Slate, Meagher & Flom LLP, is a director of Citigroup and served
as a director of TIGHI from 1996 to April 2000. He and other attorneys at that
firm beneficially own an aggregate of less than one percent of the common stock
of Citigroup.


                                    EXPERTS


     The consolidated financial statements and related financial statement
schedules of our company and our subsidiaries, as of December 31, 2001 and 2000,
and for each of the years in three-year period ended December 31, 2001, included
herein and elsewhere in the registration statement, have been included herein
and in the registration statement in reliance upon the reports of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The audit
reports refer to a change in accounting for derivative instruments and hedging
activities and accounting for securitized financial assets in 2001, and a change
in accounting for insurance and reinsurance contracts that do not transfer
insurance risk and accounting for insurance related assessments in 1999.


                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed a Registration Statement on Form S-1 with the SEC regarding
this offering. This prospectus, which is part of the registration statement,
does not contain all of the information included in the registration statement,
and you should refer to the registration statement and its exhibits to read that
information. References in this prospectus to any of our contracts or other
documents are not necessarily complete, and you should refer to the exhibits
attached to the registration statement for copies of the actual contract or
document. You may read and copy the registration statement, the related exhibits
and the reports, proxy statements and other information we file with the SEC at
the SEC's public reference facilities maintained by the SEC at Judiciary Plaza,
450 Fifth Street, N.W., in Washington, D.C. 20549. You can also request copies
of those documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. The SEC also maintains an Internet site that
contains reports, proxy and information statements and other information
regarding issuers that file with the SEC. The site's Internet address is
www.sec.gov. You may also request a copy of these filings, at no cost, by
writing or telephoning us at: Travelers Property Casualty Corp., One Tower
Square, Hartford, Connecticut 06183 (860) 277-0111.

                                       136


                      GLOSSARY OF SELECTED INSURANCE TERMS

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

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

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

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

Assigned risk pools...........   Reinsurance pools which cover risks for those
                                 unable to purchase insurance in the voluntary
                                 market. Possible reasons for this inability
                                 include the risk being too great or the profit
                                 being too small under the required insurance
                                 rate structure. The costs of the risks
                                 associated with these pools are charged back to
                                 insurance carriers in proportion to their
                                 direct writings.

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

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

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

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

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

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

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

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

                                       G-1


                                 contracts are typically designed to cover
                                 property insurance losses but can be written to
                                 cover casualty insurance losses such as from
                                 workers' compensation policies.

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

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

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

Claim adjustment expenses.....   See "Loss adjustment expenses."

Claims and claim adjustment
expenses......................   See "Loss and loss adjustment expenses."

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

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

Commercial lines..............   The various kinds of property and casualty
                                 insurance that are written for businesses.

Commercial multi-peril
policies......................   Refers to policies which cover both property
                                 and third-party liability exposures.

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

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

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

Direct written premiums.......   The amounts charged by an insurer to insureds
                                 in exchange for coverages provided in
                                 accordance with the terms of an insurance
                                 contract. It excludes the impact of all
                                 reinsurance premiums, either assumed or ceded.

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

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

                                       G-2


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

Excess SIPC...................   A type of surety protection provided for
                                 broker-dealer firms, excess of primary
                                 protection programs such as that provided by
                                 the Securities Investors Protection Corporation
                                 (SIPC), which may respond in favor of
                                 broker-dealer customers in the event of missing
                                 customer property following a broker-dealer's
                                 liquidation.

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

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

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

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

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

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

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

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

Large deductible policy.......   An insurance policy where the customer assumes
                                 at least $25,000 or more of each loss.
                                 Typically, the insurer is responsible for
                                 paying the entire loss under those policies and
                                 then seeks reimbursement from the insured for
                                 the deductible amount.

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

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

Loss and LAE ratio............   For SAP it is the ratio of incurred losses and
                                 loss adjustment expenses to net earned
                                 premiums. For GAAP it is the ratio of

                                       G-3


                                 incurred losses and loss adjustment expenses
                                 reduced by an allocation of fee income to net
                                 earned premiums.

Loss reserves.................   Liabilities established by insurers and
                                 reinsurers to reflect the estimated cost of
                                 claims incurred that the insurer or reinsurer
                                 will ultimately be required to pay in respect
                                 of insurance or reinsurance it has written.
                                 Reserves are established for losses and for
                                 LAE, and consist of case reserves and IBNR
                                 reserves. As the term is used in this document,
                                 "loss reserves" is meant to include reserves
                                 for both losses and for LAE.

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

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

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

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

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

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

Producer......................   Contractual entity which directs insureds to
                                 the insurer for coverage. This term includes
                                 agents and brokers.

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

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

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

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

Reinsurance agreement.........   A contract specifying the terms of a
                                 reinsurance transaction.

Residual market (involuntary
business).....................   Insurance market which provides coverage for
                                 risks unable to purchase insurance in the
                                 voluntary market. Possible reasons for this
                                 inability include the risk being too great or
                                 the profit potential too small under the
                                 required insurance rate structure.

                                       G-4


                                 Residual markets are frequently created by
                                 state legislation either because of lack of
                                 available coverage such as property coverage in
                                 a windstorm prone area or protection of the
                                 accident victim as in the case of workers'
                                 compensation. The costs of the residual market
                                 are usually charged back to the direct
                                 insurance carriers in proportion to the
                                 carriers' voluntary market shares for the type
                                 of coverage involved.

Retention.....................   The amount of exposure a policyholder company
                                 retains on any one risk or group of risks. The
                                 term may apply to an insurance policy, where
                                 the policyholder is an individual, family or
                                 business, or a reinsurance policy, where the
                                 policyholder is an insurance company.

Retention ratio...............   Current period renewal accounts or policies as
                                 a percentage of total accounts or policies
                                 available for renewal.

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

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

Risk-based capital ("RBC")....   A measure adopted by the NAIC and enacted by
                                 states for determining the minimum statutory
                                 capital and surplus requirements of insurers
                                 with required regulatory and company actions
                                 that apply when an insurer's capital and
                                 surplus is below these minimums.

Risk retention group..........   An alternative form of insurance in which
                                 members of a similar profession or business
                                 band together to self insure their risks.

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

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

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

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

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

Statutory surplus.............   As determined under SAP, the amount remaining
                                 after all liabilities, including loss reserves,
                                 are subtracted from all admitted assets.
                                 Admitted assets are assets of an insurer
                                 prescribed or permitted by a state to be
                                 recognized on the
                                       G-5


                                 statutory balance sheet. Statutory surplus is
                                 also referred to as "surplus" or "surplus as
                                 regards policyholders" for statutory accounting
                                 purposes.

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

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

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

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

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

Unassigned surplus............   The undistributed and unappropriated amount of
                                 statutory surplus.

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

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

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

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

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

                                       G-6


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

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

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

                                       G-7


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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




                                                              PAGE
                                                              ----
                                                           
Independent Auditors' Report................................  F-2
Consolidated Financial Statements:
  Consolidated Statement of Income for the years ended
     December 31, 2001, 2000 and 1999.......................  F-3
  Consolidated Balance Sheet at December 31, 2001 and
     2000...................................................  F-5
  Consolidated Statement of Changes in Shareholder's Equity
     for the years ended December 31, 2001, 2000 and 1999...  F-6
  Consolidated Statement of Cash Flows for the years ended
     December 31, 2001, 2000 and 1999.......................  F-7
  Notes to Consolidated Financial Statements................  F-8



                                       F-1



                          INDEPENDENT AUDITORS' REPORT


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

     We have audited the consolidated balance sheets of Travelers Property
Casualty Corp. (formerly known as The Travelers Insurance Group Inc.) and
subsidiaries as of December 31, 2001 and 2000, and the related consolidated
statements of income, changes in shareholder's equity and cash flows for each of
the years in the three-year period ended December 31, 2001. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Travelers
Property Casualty Corp. and subsidiaries as of December 31, 2001 and 2000, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.

     As discussed in Note 1 to the consolidated financial statements, the
Company changed its methods of accounting for derivative instruments and hedging
activities and for securitized financial assets in 2001, and its methods of
accounting for insurance and reinsurance contracts that do not transfer
insurance risk and for insurance-related assessments in 1999.


                                  /s/ KPMG LLP


Hartford, Connecticut
January 17, 2002, except
as to Note 1, which is as of March 19, 2002


                                       F-2



               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENT OF INCOME




                                                              FOR THE YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                2001        2000        1999
                                                              --------    --------    --------
                                                               (IN MILLIONS, EXCEPT PER SHARE
                                                                          AMOUNTS)
                                                                             
REVENUES
Premiums....................................................   $9,411      $8,462      $8,009
Net investment income.......................................    2,034       2,162       2,093
Fee income..................................................      347         312         275
Realized investment gains...................................      323          47         112
Other revenues..............................................      116          88          84
                                                               ------      ------      ------
     Total revenues.........................................   12,231      11,071      10,573
                                                               ------      ------      ------
CLAIMS AND EXPENSES
Claims and claim adjustment expenses........................    7,765       6,473       6,059
Amortization of deferred acquisition costs..................    1,539       1,298       1,260
Interest expense............................................      205         296         238
General and administrative expenses.........................    1,333       1,140       1,177
                                                               ------      ------      ------
     Total claims and expenses..............................   10,842       9,207       8,734
                                                               ------      ------      ------
Income before federal income taxes, minority interest and
  cumulative effect of changes in accounting principles.....    1,389       1,864       1,839
Federal income taxes........................................      327         492         479
Minority interest, net of tax...............................       --          60         224
                                                               ------      ------      ------
Income before cumulative effect of changes in accounting
  principles................................................    1,062       1,312       1,136
Cumulative effect of change in accounting for derivative
  instruments and hedging activities, net of tax............        4          --          --
Cumulative effect of change in accounting for securitized
  financial assets, net of tax..............................       (1)         --          --
Cumulative effect of change in accounting for
  insurance-related assessments, net of tax and minority
  interest..................................................       --          --        (135)
Cumulative effect of change in accounting for insurance and
  reinsurance contracts that do not transfer insurance risk,
  net of tax and minority interest..........................       --          --          23
                                                               ------      ------      ------
Net income..................................................   $1,065      $1,312      $1,024
                                                               ======      ======      ======
Basic earnings per share:
  Income before cumulative effect of accounting changes.....   $ 1.38      $ 1.71      $ 1.48
  Cumulative effect of accounting changes...................       --          --       (0.15)
                                                               ------      ------      ------
  Net income................................................   $ 1.38      $ 1.71      $ 1.33
                                                               ======      ======      ======
Diluted earnings per share:
  Income before cumulative effect of accounting changes.....   $ 1.38      $ 1.71      $ 1.48
  Cumulative effect of accounting changes...................       --          --       (0.15)
                                                               ------      ------      ------
  Net income................................................   $ 1.38      $ 1.71      $ 1.33
                                                               ======      ======      ======
Weighted average number of common shares
  outstanding -- basic......................................      769         769         769
Weighted average number of common shares
  outstanding -- diluted....................................      769         769         769




                See notes to consolidated financial statements.

                                       F-3


               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES



                CONSOLIDATED STATEMENT OF INCOME -- (CONTINUED)





                                                              FOR THE YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                2001        2000        1999
                                                              --------    --------    --------
                                                               (IN MILLIONS, EXCEPT PER SHARE
                                                                          AMOUNTS)
                                                                             
Pro forma basic earnings per share(1):
  Income before cumulative effect of accounting changes.....   $ 1.06          --          --
  Cumulative effect of accounting changes...................       --          --          --
                                                               ------
  Net income................................................   $ 1.06          --          --
                                                               ======
Pro forma diluted earnings per share(1):
  Income before cumulative effect of accounting changes.....   $ 1.06          --          --
  Cumulative effect of accounting changes...................       --          --          --
                                                               ------
  Net income................................................   $ 1.06          --          --
                                                               ======
Pro forma weighted average number of common shares
  outstanding -- basic(1)...................................    1,000          --          --
Pro forma weighted average number common shares
  outstanding -- diluted(1).................................    1,000          --          --



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

(1) Unaudited. See note 18 "Pro Forma Information".



                See notes to consolidated financial statements.

                                       F-4


               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET




                                                                      AT DECEMBER 31,
                                                              --------------------------------
                                                                  2001        2001      2000
                                                              ------------   -------   -------
                                                               PRO FORMA       (IN MILLIONS,
                                                              (UNAUDITED)     EXCEPT SHARES)
                                                                  (SEE
                                                                NOTE 18)
                                                                              
ASSETS
Fixed maturities, available for sale at fair value
  (including $976 and $1,042 at December 31, 2001 and 2000,
  respectively, subject to securities lending agreements)
  (amortized cost $25,461 and $24,332)......................    $25,851      $25,851   $25,001
Equity securities, at fair value (cost $1,079 and $1,062)...      1,083        1,083     1,019
Mortgage loans..............................................        274          274       286
Real estate held for sale...................................         38           38        47
Short-term securities.......................................      2,798        2,798     2,566
Trading securities..........................................        628          628        --
Other investments...........................................      1,947        1,947     1,835
                                                                -------      -------   -------
     Total investments......................................     32,619       32,619    30,754
                                                                -------      -------   -------
Cash........................................................        237          237       196
Investment income accrued...................................        360          360       355
Premium balances receivable.................................      3,657        3,657     3,262
Reinsurance recoverables....................................     11,047       11,047     9,444
Deferred acquisition costs..................................        768          768       614
Deferred federal income taxes...............................      1,182        1,182     1,097
Contractholder receivables..................................      2,198        2,198     2,104
Goodwill....................................................      2,577        2,577     2,475
Other assets................................................      3,133        3,133     3,549
                                                                -------      -------   -------
     Total assets...........................................    $57,778      $57,778   $53,850
                                                                =======      =======   =======
LIABILITIES
Claims and claim adjustment expense reserves................    $30,737      $30,737   $28,442
Unearned premium reserves...................................      5,667        5,667     4,792
Contractholder payables.....................................      2,198        2,198     2,104
Notes payable to affiliates.................................      6,397        1,697     2,156
Long-term debt..............................................        380          380       850
Other liabilities...........................................      5,513        5,513     5,392
                                                                -------      -------   -------
     Total liabilities......................................     50,892       46,192    43,736
                                                                -------      -------   -------
TIGHI-obligated mandatorily redeemable securities of
  subsidiary trusts holding solely junior subordinated debt
  securities of TIGHI.......................................        900          900       900
                                                                -------      -------   -------
SHAREHOLDER'S EQUITY
Common stock (see note 1):
  Class A, $.01 par value, 1,500 million shares authorized;
     269 million shares issued and outstanding..............          3            3         3
  Class B, $.01 par value, 1,500 million shares authorized;
     500 million shares issued and outstanding..............          5            5         5
Additional paid-in capital..................................      4,432        4,432     3,815
Retained earnings...........................................      1,304        6,004     4,990
Accumulated other changes in equity from nonowner sources...        242          242       401
                                                                -------      -------   -------
     Total shareholder's equity.............................      5,986       10,686     9,214
                                                                -------      -------   -------
     Total liabilities and shareholder's equity.............    $57,778      $57,778   $53,850
                                                                =======      =======   =======



                See notes to consolidated financial statements.
                                       F-5


               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY




                                                              FOR THE YEAR ENDED DECEMBER 31,
                                                       ----------------------------------------------
                                                                                         SHARES
                                                                                   ------------------
                                                        2001      2000     1999    2001   2000   1999
                                                       -------   ------   ------   ----   ----   ----
                                                                       (IN MILLIONS)
                                                                               
COMMON STOCK AND ADDITIONAL
  PAID-IN CAPITAL
Balance, beginning of year...........................  $ 3,823   $3,792   $3,764   769    769    769
Acquisition of affiliates............................      578       --       --
Other................................................       39       31       28    --     --     --
                                                       -------   ------   ------   ---    ---    ---
Balance, end of year.................................    4,440    3,823    3,792   769    769    769
                                                       -------   ------   ------   ---    ---    ---
RETAINED EARNINGS
Balance, beginning of year...........................    4,990    2,819    1,242
Net income...........................................    1,065    1,312    1,024
Receipts from former subsidiaries....................      475      859      553
Dividends............................................     (526)      --       --
                                                       -------   ------   ------
Balance, end of year.................................    6,004    4,990    2,819
                                                       -------   ------   ------
ACCUMULATED OTHER CHANGES IN EQUITY FROM NONOWNER
  SOURCES, NET OF TAX
Balance, beginning of year...........................      401     (171)     765
Net unrealized gains on investment securities
  obtained as part of affiliate acquisition..........       21       --       --
Net unrealized gain (loss) on investment securities,
  net of reclassification adjustment (see note 10)...     (173)     579     (944)
Foreign currency translation adjustments.............       (3)      (7)       8
Cumulative effect of change in accounting for
  derivative instruments and hedging activities......       (4)      --       --
                                                       -------   ------   ------
Balance, end of year.................................      242      401     (171)
                                                       -------   ------   ------   ---    ---    ---
Total shareholder's equity and shares outstanding....  $10,686   $9,214   $6,440   769    769    769
                                                       =======   ======   ======   ===    ===    ===
SUMMARY OF CHANGES IN EQUITY FROM NONOWNER SOURCES
Net income...........................................  $ 1,065   $1,312   $1,024
Other changes in equity from nonowner sources, net of
  tax................................................     (180)     572     (936)
                                                       -------   ------   ------
Total changes in equity from nonowner sources........  $   885   $1,884   $   88
                                                       =======   ======   ======



                See notes to consolidated financial statements.
                                       F-6


               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS



                                                              FOR THE YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                2001        2000        1999
                                                              --------    --------    --------
                                                                       (IN MILLIONS)
                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................  $  1,065    $  1,312    $  1,024
  Adjustments to reconcile net income to net cash provided
    by operating activities
    Realized investment gains...............................      (323)        (47)       (112)
    Cumulative effect of changes in accounting principles,
      net of tax............................................        (3)         --         112
    Depreciation and amortization...........................       101          90          73
    Deferred federal income taxes...........................        11         167         212
    Amortization of deferred policy acquisition costs.......     1,539       1,298       1,260
    Premium balances receivable.............................      (174)       (179)        107
    Reinsurance recoverables................................    (1,386)       (168)       (122)
    Deferred policy acquisition costs.......................    (1,620)     (1,355)     (1,266)
    Insurance reserves......................................     1,887        (102)       (627)
    Other...................................................       122        (352)       (190)
                                                              --------    --------    --------
      Net cash provided by operating activities.............     1,219         664         471
                                                              --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
  Fixed maturities..........................................     2,081       1,806       1,678
  Mortgage loans............................................        16         289         231
Proceeds from sales of investments
  Fixed maturities..........................................    14,467      12,507      10,023
  Equity securities.........................................       455       2,355         873
  Real estate held for sale.................................        --          19         122
Purchases of investments
  Fixed maturities..........................................   (15,989)    (12,803)    (10,840)
  Equity securities.........................................       (67)     (2,332)     (1,072)
  Mortgage loans............................................        (4)        (40)        (42)
  Real estate...............................................        (6)         --          --
  Tender offer of minority interest shareholders............        --      (2,399)         --
  Short-term securities, net................................      (106)     (1,087)        (73)
  Other investments, net....................................      (671)       (596)       (519)
  Securities transactions in course of settlement...........        58         491        (279)
  Business acquisitions.....................................      (329)       (298)         --
                                                              --------    --------    --------
      Net cash provided by (used in) investing activities...       (95)     (2,088)        102
                                                              --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES
  Payment of long-term debt.................................      (500)         --        (400)
  Issuance of note payable to affiliate.....................       500       2,391          --
  Payments of notes payable to affiliates...................    (1,040)     (1,688)       (738)
  Receipts from former subsidiaries.........................       475         859         553
  Return of capital from former subsidiaries................         8           3           5
  Dividends to parent company...............................      (526)         --          --
                                                              --------    --------    --------
      Net cash provided by (used in) financing activities...    (1,083)      1,565        (580)
                                                              --------    --------    --------
  Net increase (decrease) in cash...........................        41         141          (7)
  Cash at beginning of period...............................       196          55          62
                                                              --------    --------    --------
  Cash at end of period.....................................  $    237    $    196    $     55
                                                              ========    ========    ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Income taxes paid.........................................  $    326    $    310    $    346
  Interest paid.............................................  $    130    $    155    $    165
                                                              ========    ========    ========


                See notes to consolidated financial statements.
                                       F-7


               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  BASIS OF PRESENTATION


     The consolidated financial statements include the accounts of Travelers
Property Casualty Corp. (formerly known as The Travelers Insurance Group
Inc.)(TPC), an indirect, wholly-owned subsidiary of Citigroup Inc. (Citigroup),
and its subsidiaries (collectively, the Company). TPC is being reorganized in
connection with Citigroup's announced plans for the sale of up to 20% of its
property casualty business in a proposed initial public offering, followed by a
tax-free distribution of a portion of Citigroup's ownership interest in TPC,
which together with the shares being offered in the initial public offering will
represent approximately 90.1% of TPC's common equity (more than 90% of the
combined voting power of all classes of TPC's voting securities), subject to
regulatory approval and receipt of a private letter ruling from the Internal
Revenue Service that the distribution will be tax-free to Citigroup, its
stockholders and TPC. The consolidated financial statements include the
adjustments necessary to reflect the reorganization of TPC's operations as if
those changes have been consummated prior to the proposed public offering.


     TPC's consolidated financial statements include the accounts of its primary
subsidiary, Travelers Insurance Group Holdings Inc. (formerly known as Travelers
Property Casualty Corp.) (TIGHI), a property casualty insurance holding company.
Also included are the accounts of CitiInsurance International Holdings Inc. and
its subsidiaries (CitiInsurance), whose principal assets are its investments in
the property casualty and life operations of Fubon Insurance Co., Ltd. and Fubon
Assurance Co., Ltd. On February 28, 2002, TPC sold CitiInsurance to other
Citigroup affiliated companies for $403 million, its net book value. TPC has
applied $138 million of the proceeds from this sale to repay intercompany
indebtedness to Citigroup. It has also agreed to purchase from Citigroup the
premises located at One Tower Square, Hartford, Connecticut and other properties
for $68 million.

     Pursuant to the reorganization referred to above, TPC's consolidated
financial statements have been adjusted to exclude the accounts of certain
wholly-owned TPC subsidiaries, principally The Travelers Insurance Company (TIC)
and its subsidiaries (its U.S. life insurance operations), certain other wholly-
owned non-insurance subsidiaries of TPC and substantially all of TPC's assets
and certain liabilities not related to the property casualty business.

     During April 2000, TPC completed a cash tender offer to purchase all of the
outstanding shares of Class A Common Stock of TIGHI at a price of $41.95 per
share. See note 2.

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

     Certain reclassifications have been made to prior years' financial
statements to conform to the current year's presentation. Significant
intercompany transactions and balances have been eliminated.

  OTHER TRANSACTIONS

     The following transactions have been or will be completed in conjunction
with the corporate reorganization and the offerings:

     In February 2002, the Company's board of directors declared a dividend of
$1.0 billion to Citigroup in the form of a non-interest bearing note payable on
December 31, 2002.

     In February 2002, the Company's board of directors also declared a dividend
of $3.7 billion to Citigroup in the form of a $3.7 billion note payable in two
installments. The first installment of

                                       F-8

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$150 million will be payable on May 9, 2004 and the second installment of $3.55
billion will be payable on February 7, 2017. This note begins to bear interest
after May 9, 2002 at a rate of 7.25% per annum. This note may be prepaid at any
time in whole or in part without penalty or premium.

     In conjunction with the purchase of TIGHI's outstanding shares in April
2000, TPC entered into a note agreement with Citigroup. On February 7, 2002,
this note agreement was replaced by a new note agreement. Under the terms of the
new note agreement, interest accrues on the aggregate principal amount
outstanding at the commercial paper rate (the then current short-term rate) plus
10 basis points per annum. Interest is compounded monthly. The principal amount
of the note may be prepaid in whole or in part without penalty and is due on
April 30, 2005. At December 31, 2001 and 2000, the principal outstanding under
the prior note agreement was $1.2 billion and $1.9 billion, respectively. At
March 1, 2002, the outstanding amount under the new note agreement was $1.1
billion.

     In connection with the corporate reorganization. TPC has agreed to purchase
from an affiliate the premises located at One Tower Square, Hartford,
Connecticut and other properties for $68 million which it currently leases. See
note 12.


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


     Concurrently with the initial public offering, TPC is offering $850 million
of its   % convertible junior subordinated notes due 2032, plus up to an
additional $42.5 million aggregate principal amount of notes if the
over-allotment option for that offering is exercised in full.

  ACCOUNTING CHANGES

     Accounting for Derivative Instruments and Hedging Activities

     Effective January 1, 2001, the Company adopted the Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (FAS 133). FAS
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the consolidated balance sheet and measure those instruments at
fair value. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a hedge of
the exposure to variable cash flows of a recognized asset or liability or of a
forecasted transaction, or (c) a hedge of the foreign currency exposure of a net
investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction. The accounting for changes in the fair value of a derivative (that
is, gains and losses) depends on the intended use of the derivative and the
resulting designation. See note 13.

     As a result of adopting FAS 133, the Company recorded a benefit of $4
million after tax, reflected as a cumulative catch-up adjustment in the
consolidated statement of income and a charge of $4 million after tax, reflected
as a cumulative catch-up adjustment in the accumulated other changes in equity
from nonowner sources section of shareholder's equity. In addition, the Company
redesignated certain investments as trading from available for sale in
accordance with the transition provisions of FAS 133 resulting in a gross gain
of $12 million, reflected in realized investment gains (losses).

                                       F-9

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

     Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities

     In September 2000, the FASB issued Statement of Financial Accounting
Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, a replacement of FASB Statement No. 125"
(FAS 140). Provisions of FAS 140 primarily relating to transfers of financial
assets and securitizations that differ from provisions of "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
(FAS 125) are effective for transfers taking place after March 31, 2001. Special
purpose entities (SPEs) used in securizations that are currently qualifying SPEs
under FAS 125 will continue to be treated as qualifying SPEs as long as they
issue no new beneficial interests and accept no new asset transfers after March
31, 2001, other than transfers committed to prior to that date. Under FAS 140,
qualifying SPEs are not consolidated by the transferor. FAS 140 also amends the
accounting for collateral and requires new disclosures for collateral,
securitizations and retained interests in securitizations. These provisions were
effective for financial statements for fiscal years ending after December 15,
2000. The accounting for collateral, as amended, requires (a) certain assets
pledged as collateral to be separately reported in the consolidated balance
sheet from assets not so encumbered and (b) disclosure of assets pledged as
collateral that have not been reclassified and separately reported. The adoption
of FAS 140 did not have a significant effect on results of operations, financial
condition or liquidity. See note 4.

    Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That
    Do Not Transfer Insurance Risk

     Effective January 1, 1999, the Company adopted the Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants'
(AcSEC) Statement of Position 98-7, "Deposit Accounting: Accounting for
Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk" (SOP
98-7). SOP 98-7 provides guidance on how to account for insurance and
reinsurance contracts that do not transfer insurance risk and applies to all
entities and all such contracts, except for long-duration life and health
insurance contracts. The method used to account for such contracts is referred
to as deposit accounting. This SOP does not address when deposit accounting
should be applied. SOP 98-7 identifies several methods of deposit accounting for
insurance and reinsurance contracts that do not transfer insurance risk and
provides guidance on the application of each method. The effect of initially
adopting SOP 98-7 is to be reported as a cumulative catch-up adjustment.
Restatement of previously issued financial statements is not permitted. As a
result of adopting SOP 98-7, the Company recorded a benefit of $23 million after
tax and minority interest, reflected as a cumulative catch-up adjustment. This
SOP did not have a significant impact on results of operations, financial
condition or liquidity.

                                       F-10

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments

     Effective January 1, 1999, the Company adopted the AcSEC Statement of
Position 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments" (SOP 97-3). SOP 97-3 provides guidance for
determining when an entity should recognize a liability for guaranty-fund and
other insurance-related assessments, how to measure that liability, and when an
asset may be recognized for the recovery of such assessments through premium tax
offsets or policy surcharges. The effect of the initial adoption of this SOP is
to be reported as a cumulative catch-up adjustment. Restatement of previously
issued financial statements is not permitted. As a result of adopting SOP 97-3,
the Company recorded a charge of $135 million after tax and minority interest,
reflected as a cumulative catch-up adjustment. Aside from the initial impact at
adoption, this SOP did not have a significant impact on results of operations,
financial condition or liquidity.

  ACCOUNTING POLICIES

     Investments

     Fixed maturities include bonds, notes and redeemable preferred stocks.
Fixed maturities are valued based upon quoted market prices or dealer quotes, or
if quoted market prices or dealer quotes are not available, discounted expected
cash flows using market rates commensurate with the credit quality and maturity
of the investment. Also included in fixed maturities are loan-backed and
structured securities, which are amortized using the retrospective method. The
effective yield used to determine amortization is calculated based upon actual
historical and projected future cash flows, which are obtained from a widely-
accepted securities data provider. Fixed maturities, including instruments
subject to securities lending agreements (see note 4), are classified as
"available for sale" and are reported at fair value, with unrealized investment
gains and losses, net of income taxes, charged or credited directly to
shareholder's equity.

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

     Mortgage loans are carried at amortized cost. A mortgage loan is considered
impaired when it is probable that the Company will be unable to collect
principal and interest amounts due. For mortgage loans that are determined to be
impaired, a reserve is established for the difference between the amortized cost
and fair market value of the underlying collateral. In estimating fair value,
the Company uses interest rates reflecting the returns required in the current
real estate financing market. Impaired loans were not significant at December
31, 2001 and 2000.

     Real estate held for sale is carried at the lower of cost or fair value
less estimated costs to sell. Fair value is established at the time of
acquisition by internal analysis or external appraisers, using discounted cash
flow analyses and other acceptable techniques. Thereafter, an impairment is
taken if the carrying value of the property exceeds its current fair value less
estimated costs to sell.

     Accrual of income is suspended on fixed maturities or mortgage loans that
are in default, or on which it is likely that future payments will not be made
as scheduled. Interest income on investments in default is recognized only as
payment is received. Investments included in the consolidated balance sheet that
were not income-producing for the preceding 12 months were not significant.

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

                                       F-11

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

     Other invested assets include partnership investments and real estate joint
ventures accounted for on the equity method of accounting. Undistributed income
is reported in net investment income.

     Investment Gains and Losses

     Realized investment gains and losses are included as a component of pretax
revenues based upon specific identification of the investments sold on the trade
date. Other-than-temporary declines in fair value of investments are included in
realized investment gains and losses.

     Reinsurance Recoverables

     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.

     Deferred Acquisition Costs

     Amounts which vary with and are primarily related to the production of new
business, primarily commissions and premium taxes, are deferred and amortized
pro rata over the contract periods in which the related premiums are earned.
Deferred acquisition costs are reviewed to determine if they are recoverable
from future income, and if not, are charged to expense. Future investment income
attributable to related premiums is taken into account in measuring the
recoverability of the carrying value of this asset. All other acquisition
expenses are charged to operations as incurred.

     Contractholder Receivables and Payables

     Under certain workers' compensation insurance contracts with deductible
features, the Company is obligated to pay the claimant for the full amount of
the claim. The Company is subsequently reimbursed by the policyholder for the
deductible amount. These amounts are included on a gross basis in the
consolidated balance sheet in contractholder payables and contractholder
receivables, respectively.

     Goodwill and Intangible Assets

     Prior to the adoption of FASB Statements of Financial Accounting Standards
No. 141, "Business Combinations" (FAS 141) and No. 142, "Goodwill and Other
Intangible Assets" (FAS 142), which will be applied to goodwill and intangible
asset amortization in the first quarter of 2002, goodwill is generally being
amortized on a straight-line basis over a 40-year period. TPC's purchase of the
outstanding shares of Class A Common Stock of TIGHI (see note 1, basis of
presentation) generated goodwill of approximately $1.0 billion, which is being
amortized on a straight-line basis over a 36-year period. The Company's
acquisition of The Northland Company and its subsidiaries (see note 2) included
goodwill and intangible assets of approximately $243 million, which are being
amortized on a straight-line basis over a 20-year period for goodwill and
periods of 15 to 20 years for the intangible assets. The Company's acquisition
of the surety business of Reliance Group Holdings, Inc. (Reliance Surety) (see
note 2) included an intangible asset of approximately $450 million, which is
being amortized on a straight-line basis over a 15-year period. Amortization
expense included in the consolidated statement of income was $107 million, $84
million and $43 million for the years ended December 31, 2001, 2000 and 1999,
respectively.

                                       F-12

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The carrying amount of these assets is regularly reviewed for indicators of
impairments in value. Impairments would be recognized in operating results if a
permanent diminution in value is deemed to have occurred, based upon an
evaluation of expected future cash flows for the Company in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." An
impairment would be measured by the amount the present value of the expected
future net cash flows from operating activities of the Company (applying the
discount rate(s) used to determine the fair value of the acquired assets and
assumed liabilities at the date of acquisition) is less than the carrying amount
of goodwill.

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

     Claims and Claim Adjustment Expense Reserves

     Claims and claim adjustment expense reserves represent estimated provisions
for both reported and unreported claims incurred and related expenses. The
reserves are adjusted regularly based upon experience. Included in the claims
and claim adjustment expense reserves in the consolidated balance sheet at both
December 31, 2001 and 2000 are $1.4 billion of reserves related to workers'
compensation that have been discounted using an interest rate of 5%.

     In determining claims and claim adjustment expense reserves, the Company
carries on a continuing review of its overall position, its reserving techniques
and its reinsurance. The reserves are also reviewed periodically by a qualified
actuary employed by the Company. These reserves represent the estimated ultimate
cost of all incurred claims and claim adjustment expenses. Since the reserves
are based on estimates, the ultimate liability may be more or less than such
reserves. The effects of changes in such estimated reserves are included in the
results of operations in the period in which the estimates are changed. Such
changes may be material to the results of operations and could occur in a future
period.

     Other Liabilities

     Included in other liabilities in the consolidated balance sheet is the
Company's estimate of its liability for guaranty-fund and other
insurance-related assessments. The liability for expected state guaranty-fund
and other premium-based assessments is recognized as the Company writes or
becomes obligated to write or renew the premiums on which the assessments are
expected to be based. The liability for loss-based assessments is recognized as
the related losses are incurred. At December 31, 2001 and 2000, the Company had
a liability of $200 million and $223 million, respectively, for guaranty-fund
and other assessments and related recoveries of $23 million and $28 million,
respectively. The liability for such assessments and their related recoveries
are not discounted for the time value of money. The assessments are expected to
be paid over a period ranging from one year to the life expectancy of certain
workers' compensation claimants and the recoveries are expected to occur over
the same period of time.

     Also included in other liabilities is an accrual for policyholder
dividends. Certain insurance contracts, primarily workers compensation, are
participating whereby dividends are paid to policyholders in accordance with
contract provisions. Net written premiums for participating dividend policies
were approximately 3%, 4% and 6% of total Company net written premiums for the
years ended December 31, 2001, 2000 and 1999, respectively. Policyholder
dividends are accrued against earnings using best available estimates of amounts
to be paid. Policyholder dividends were $28 million, $32 million and $47 million
for the years ended December 31, 2001, 2000 and 1999, respectively.

                                       F-13

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Statutory Accounting Practices

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

     Premiums and Unearned Premium Reserves

     Premiums are recognized as revenues pro rata over the policy period.
Unearned premium reserves represent the unexpired portion of policy premiums.
Accrued retrospective premiums are included in premium balances receivable.

     Fee Income

     Fee income includes servicing fees from carriers and revenues from large
deductible policies and service contracts and are recognized pro rata over the
contract or policy periods.

     Other Revenues

     Other revenues include revenues from premium installment charges, which are
recognized as collected, revenues of noninsurance subsidiaries other than fee
income and gains and losses on dispositions of assets and operations other than
realized investment gains and losses.

     Federal Income Taxes

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

     Stock-Based Compensation

     The Company accounts for the stock-based compensation plans using the
accounting method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and has included in the
notes to consolidated financial statements the pro forma disclosures required by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). See note 15. The Company accounts for its stock-based
non-employee compensation plans at fair value.

     Earnings Per Share


     Earnings per share has been computed in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per Share."
Shares have been adjusted to give effect to the recapitalization in March 2002,
whereby the outstanding shares of common stock (1,500 shares) will be changed
into 269,000,000 shares of class A common stock and 500,000,000 shares of class
B common


                                       F-14

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stock. The following is a reconciliation of the income and share data used in
the basic and diluted earnings per share computations:



                                                                    FOR THE YEAR ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                2001       2000       1999
                                                              --------   --------   --------
                                                              (IN MILLIONS, EXCEPT PER SHARE
                                                                         AMOUNTS)
                                                                           
Income before cumulative effect of accounting changes.......   $1,062     $1,312     $1,136
Cumulative effect of accounting changes.....................        3         --       (112)
                                                               ------     ------     ------
Income available to common stockholders for basic EPS
  (Numerator)...............................................    1,065      1,312      1,024
Effect of dilutive securities...............................       --         --         --
                                                               ------     ------     ------
Income available to common stockholders for diluted EPS
  (Numerator)...............................................   $1,065     $1,312     $1,024
                                                               ======     ======     ======
Weighted average common shares outstanding applicable to
  basic EPS (Denominator)...................................      769        769        769
                                                               ------     ------     ------
Effect of dilutive shares...................................       --         --         --
                                                               ------     ------     ------
Adjusted weighted average common shares outstanding
  applicable to diluted EPS (Denominator)...................      769        769        769
                                                               ======     ======     ======
Basic earnings per share:
Income before cumulative effect of accounting changes.......   $ 1.38     $ 1.71     $ 1.48
Cumulative effect of accounting changes.....................       --         --      (0.15)
                                                               ------     ------     ------
Net income..................................................   $ 1.38     $ 1.71     $ 1.33
                                                               ======     ======     ======
Diluted earnings per share:
Income before cumulative effect of accounting changes.......   $ 1.38     $ 1.71     $ 1.48
Cumulative effect of accounting changes.....................       --         --      (0.15)
                                                               ------     ------     ------
Net income..................................................   $ 1.38     $ 1.71     $ 1.33
                                                               ======     ======     ======


     Derivative Financial Instruments

     The Company uses derivative financial instruments, including interest rate
swaps, equity swaps, options, forward contracts and financial futures, as a
means of hedging exposure to interest rate, equity price change and foreign
currency risk. The Company's insurance subsidiaries do not hold or issue
derivative instruments for trading purposes. In 2000 these derivative financial
instruments were treated as off-balance-sheet risk. Beginning January 1, 2001,
the Company adopted FAS 133 which establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the consolidated
balance sheet and measure those instruments at fair value. Where applicable,
hedge accounting is used to account for derivatives. To qualify for hedge
accounting, the changes in value of the derivative must be expected to
substantially offset the changes in value of the hedged item. Hedges are
monitored to ensure that there is a high correlation between the derivative
instruments and the hedged investment. Derivatives that do not qualify for hedge
accounting are marked to market with the changes in market value reflected in
the consolidated statement of income.

     Interest rate swaps, equity swaps, options, forward contracts and financial
futures were not significant at December 31, 2001 and 2000. See note 13.

                                       F-15

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  ACCOUNTING STANDARDS NOT YET ADOPTED

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

     In December 2001, AcSEC issued Statement of Position 01-06, "Accounting by
Certain Entities (Including Entities With Trade Receivables) That Lend to or
Finance the Activities of Others" (SOP 01-06). This SOP applies to any entity
that lends to or finances the activities of others. SOP 01-06 clarifies that
accounting and financial reporting practices for lending and financing
activities should be the same regardless of the type of entity engaging in those
activities. SOP 01-06 provides certain presentation and disclosure changes for
entities with trade receivables as part of the objective of requiring consistent
accounting and reporting for like transactions. This SOP also provides specific
guidance for other types of transactions specific to certain financial
institutions. To the extent an entity is not considered such a financial
institution, the other guidance provided is not applicable. This SOP is
effective for annual and interim financial statements issued for fiscal years
beginning after December 15, 2001. The adoption of this SOP is not expected to
have a significant impact on the Company's results of operations, financial
condition or liquidity.

     Business Combinations, Goodwill and Other Intangible Assets

     In July 2001, the FASB issued 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. The Company will apply the new rules on accounting for
goodwill and other intangible assets in the first quarter of 2002 and for
purchase business combinations consummated after June 30, 2001.

     Upon adoption, the Company will stop amortizing goodwill. Based on the
current levels of goodwill, this would reduce general and administrative
expenses and increase net income by approximately $72 million in 2002. In
addition, the Company has performed the transitional impairment tests using the
fair value approach required by the new standard. Based upon these tests, the
Company expects to impair approximately $243 million of goodwill and
indefinite-lived intangible assets, all attributable to The Northland Company
and subsidiaries, as a cumulative catch-up adjustment as of January 1, 2002.

     Asset Retirement Obligations

     In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 143, "Accounting for Asset Retirement Obligations" (FAS 143). FAS 143
changes the measurement of an asset retirement obligation from a
cost-accumulation approach to a fair value approach, where the fair value
(discounted value) of an asset retirement obligation is recognized as a
liability in the period in which it is incurred and accretion expense is
recognized using the credit-adjusted risk-free interest rate in effect when the
liability was initially recognized. The associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived asset and
subsequently amortized into expense. The pre-FAS 143 prescribed practice of
reporting a retirement obligation as a contra-asset will no longer be allowed.
The Company is in the process of assessing the impact of this new standard that
will take effect on January 1, 2003.

                                       F-16

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Impairment or Disposal of Long-Lived Assets

     In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (FAS
144). FAS 144 establishes a single accounting model for long-lived assets to be
disposed of by sale. A long-lived asset classified as held for sale is to be
measured at the lower of its carrying amount or fair value less cost to sell.
Depreciation (amortization) is to cease. Impairment is recognized only if the
carrying amount of a long-lived asset is not recoverable from its undiscounted
cash flows and is measured as the difference between the carrying amount and
fair value of the asset. Long-lived assets to be abandoned, exchanged for a
similar productive asset, or distributed to owners in a spin-off are considered
held and used until disposed of. Accordingly, discontinued operations are no
longer to be measured on a net realizable value basis, and future operating
losses are no longer recognized before they occur.

     The Company will adopt FAS 144 effective January 1, 2002. The provisions of
the new standard are generally to be applied prospectively and are not expected
to significantly affect the Company's results of operations, financial condition
or liquidity.

  NATURE OF OPERATIONS

     The Company comprises two business segments: Commercial Lines and Personal
Lines. See note 3.

     Commercial Lines

     Commercial Lines offers a broad array of property and casualty insurance
and insurance-related services. Protection is afforded to customers of
Commercial Lines for the risks of property loss such as fire and windstorm,
financial loss such as business interruption from property damage, liability
claims arising from operations and workers' compensation benefits through
insurance products where risk is transferred from the customer to Commercial
Lines. Coverages include workers' compensation, general liability, commercial
multi-peril, commercial automobile, property, fidelity and surety, professional
liability, and several miscellaneous coverages.

     Commercial Lines is organized into five marketing and underwriting groups,
each of which focuses on a particular client base or product grouping to provide
products and services that specifically address customers' needs: National
Accounts, Commercial Accounts, Select Accounts, Bond and Gulf.

     National Accounts provides a variety of casualty products to large
companies. Products are marketed through national and regional brokers. Programs
offered by National Accounts include risk management services, such as claims
settlement, loss control and risk management information services, which are
generally offered in connection with a large deductible or self-insured program,
and risk transfer, which is typically provided through a guaranteed cost or
retrospectively rated insurance policy. National Accounts also includes the
Company's residual market business, which primarily offers workers' compensation
products and services to the involuntary market.

     Commercial Accounts serves primarily mid-sized businesses for casualty
products and both large and mid-sized businesses for property products.
Commercial Accounts sells a broad range of property and casualty insurance
products, with an emphasis on guaranteed cost products, through a large network
of independent agents and brokers. Within Commercial Accounts, the Company has a
specialty unit which primarily writes coverages for the trucking industry and
has dedicated operations that exclusively target the construction industry,
providing insurance and risk management services for virtually all areas of
construction. These dedicated operations reflect the Company's focus on industry
specialization.

                                       F-17

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Select Accounts serves small businesses. Select Accounts' products are
generally guaranteed cost policies, often a packaged product covering property
and liability exposures. The products are sold through independent agents.

     Bond markets its products to national, mid-sized and small customers as
well as individuals, and distributes them through both national and wholesale
brokers, and retail agents and regional brokers. Bond's range of products
includes fidelity and surety bonds, excess SIPC, directors' and officers'
liability insurance, errors and omissions insurance, professional liability
insurance, employment practices liability insurance, fiduciary liability
insurance, and other related coverages.

     Gulf markets products to national, mid-sized and small customers, and
distributes them through both wholesale brokers and retail agents. Gulf provides
a diverse product and program portfolio of specialty insurance lines, with
particular emphasis on management and professional liability. Products include
various types of directors' and officers' insurance, fiduciary, employment
practices liability, errors and omissions coverages, and fidelity and commercial
crime coverages.

     Net written premiums by market for the three years ended December 31:



                                                            2001      2000      1999
                                                           ------    ------    ------
                                                                 (IN MILLIONS)
                                                                      
National Accounts........................................  $  419    $  352    $  488
Commercial Accounts......................................   2,396     2,099     1,816
Select Accounts..........................................   1,713     1,575     1,494
Bond.....................................................     590       487       207
Gulf.....................................................     608       517       403
                                                           ------    ------    ------
Total net written premiums...............................  $5,726    $5,030    $4,408
                                                           ======    ======    ======


     Personal Lines

     Personal Lines writes virtually all types of property and casualty
insurance covering personal risks. The primary coverages in Personal Lines are
personal automobile and homeowners insurance sold to individuals. These products
are distributed through independent agents, sponsoring organizations such as
employee and affinity groups, and joint marketing arrangements with other
insurers.

     Personal automobile policies provide coverage for liability to others for
both bodily injury and property damage, and for physical damage to an insured's
own vehicle from collision and various other perils. In addition, many states
require policies to provide first-party personal injury protection, frequently
referred to as no-fault coverage.

     Homeowners policies are available for dwellings, condominiums, mobile homes
and rental property contents. Protection against losses to dwellings and
contents from a wide variety of perils is included in these policies, as well as
coverage for liability arising from ownership or occupancy.

     Net written premiums by product line for the three years ended December 31:



                                                            2001      2000      1999
                                                           ------    ------    ------
                                                                 (IN MILLIONS)
                                                                      
Personal automobile......................................  $2,591    $2,366    $2,369
Homeowners and other.....................................   1,517     1,447     1,436
                                                           ------    ------    ------
Total net written premiums...............................  $4,108    $3,813    $3,805
                                                           ======    ======    ======


                                       F-18

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Catastrophe Exposure

     The Company has a geographic exposure to catastrophe losses in certain
areas of the country. Catastrophes can be caused by various natural and man-made
events including hurricanes, windstorms, earthquakes, hail, severe winter
weather, explosions and fires. The incidence and severity of catastrophes are
inherently unpredictable. The extent of losses from a catastrophe is a function
of both the total amount of insured exposure in the area affected by the event
and the severity of the event. Most catastrophes are restricted to small
geographic areas; however, hurricanes and earthquakes may produce significant
damage in larger areas, especially those that are heavily populated. The Company
generally seeks to reduce its exposure to catastrophes through individual risk
selection and the purchase of catastrophe reinsurance.

2. ACQUISITIONS

     On October 1, 2001, the Company paid $329 million to Associates First
Capital Corp., an affiliate, for The Northland Company and its subsidiaries and
Associates Lloyds Insurance Company. These entities had a combined net book
value of $572 million. The excess of this net book value over the purchase price
was reflected as a contribution to the Company. In addition, on October 3, 2001,
the capital stock of CitiCapital Insurance Company (formerly known as Associates
Insurance Company), with a net book value of $356 million, was contributed to
the Company. These acquisitions were accounted for as transfers of net assets
between entities under common control. The prior period financial statements
were not restated due to immateriality.

     In the third quarter of 2000, the Company purchased the renewal rights to a
portion of Reliance Group Holdings, Inc.'s commercial lines middle-market book
of business. The Company also acquired the renewal rights to Frontier Insurance
Group, Inc.'s environmental, excess and surplus lines casualty businesses and
certain classes of surety business. The final purchase price for these
transactions, which was dependent on the level of business renewed by the
Company, was approximately $27 million.

     On May 31, 2000, the Company completed the acquisition of the surety
business of Reliance Group Holdings, Inc. (Reliance Surety) for $580 million. In
connection with the acquisition, the Company entered into a reinsurance
arrangement for pre-existing business, and the resulting net cash outlay for
this transaction was approximately $278 million. This transaction included the
acquisition of an intangible asset of approximately $450 million, which is being
amortized over 15 years. The results of operations and the assets and
liabilities acquired from Reliance Surety are included in the financial
statements beginning June 1, 2000. This acquisition was accounted for as a
purchase.

     During April 2000, TPC completed a cash tender offer to purchase all of the
outstanding shares of TIGHI that it did not already own at a price of $41.95 per
share. The total cost of the shares acquired was approximately $2.4 billion and
generated goodwill of approximately $1.0 billion, which is being amortized over
the remaining 36 years since TPC's original investment. The goodwill represents
the excess of the cost of the acquired shares over the minority interest
liability recorded by TPC. In conjunction with the purchase of TIGHI's
outstanding shares, TPC entered into a note agreement with Citicorp, a unit of
Citigroup, to borrow up to a maximum of $2.6 billion. See note 1.

3. SEGMENT INFORMATION

     The Company comprises two reportable business segments: Commercial Lines
and Personal Lines.

     The Commercial Lines business segment serves businesses of all sizes,
providing a full range of primary and excess insurance and risk management and
insurance-related services. The Commercial Lines segment offers workers'
compensation, general liability, commercial multi-peril, commercial automobile,
property, fidelity and surety, professional liability, and several miscellaneous
coverages.

                                       F-19

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Personal Lines business segment serves consumers and writes virtually
all types of property and casualty insurance covering personal risks. The
primary coverages in Personal Lines are personal automobile and homeowners
insurance.

     The accounting policies used to generate the following segment data are the
same as those described in the summary of significant accounting policies in
note 1. The amount of investments in equity method investees and total
expenditures for additions to long-lived assets other than financial instruments
were not significant.

                                       F-20

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



                                                                                          TOTAL
                                                              COMMERCIAL    PERSONAL    REPORTABLE
AT AND FOR THE YEAR ENDED DECEMBER 31,                          LINES        LINES       SEGMENTS
--------------------------------------                        ----------    --------    ----------
                                                                         (IN MILLIONS)
                                                                               
2001
Revenues
  Premiums..................................................    $5,431       $3,964      $ 9,395
  Net investment income.....................................     1,615          410        2,025
  Fee income................................................       347           --          347
  Realized investment gains.................................       319            6          325
  Other.....................................................        39           74          113
                                                                ------       ------      -------
          Total revenues....................................    $7,751       $4,454      $12,205
                                                                ======       ======      =======
Amortization and depreciation...............................    $  954       $  695      $ 1,649
Federal income taxes........................................       301           97          398
Operating income............................................       749          241          990
Assets......................................................    48,235        8,369       56,604
2000
Revenues
  Premiums..................................................    $4,747       $3,715      $ 8,462
  Net investment income.....................................     1,713          446        2,159
  Fee income................................................       312           --          312
  Realized investment gains.................................        47           --           47
  Other.....................................................        16           71           87
                                                                ------       ------      -------
          Total revenues....................................    $6,835       $4,232      $11,067
                                                                ======       ======      =======
Amortization and depreciation...............................    $  750       $  637      $ 1,387
Federal income taxes........................................       444          157          601
Operating income............................................     1,189          360        1,549
Assets......................................................    45,166        7,961       53,127
1999
Revenues
  Premiums..................................................    $4,375       $3,634      $ 8,009
  Net investment income.....................................     1,689          400        2,089
  Fee income................................................       275           --          275
  Realized investment gains (losses)........................       127          (15)         112
  Other.....................................................        26           58           84
                                                                ------       ------      -------
          Total revenues....................................    $6,492       $4,077      $10,569
                                                                ======       ======      =======
Amortization and depreciation...............................    $  662       $  663      $ 1,325
Federal income taxes........................................       405          159          564
Operating income............................................     1,077          368        1,445
Assets......................................................    42,799        7,576       50,375


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

                                       F-21

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  BUSINESS SEGMENT RECONCILIATIONS



                                                               AT AND FOR THE YEAR ENDED DECEMBER 31,
                                                              ----------------------------------------
                                                                 2001           2000           1999
                                                              ----------     ----------     ----------
                                                                           (IN MILLIONS)
                                                                                   
REVENUE RECONCILIATION
Total revenues for reportable segments......................   $12,205        $11,067        $10,569
Other revenues(1)...........................................        26              4              4
                                                               -------        -------        -------
     Total consolidated revenues............................   $12,231        $11,071        $10,573
                                                               =======        =======        =======
INCOME RECONCILIATION, NET OF TAX
Total operating income for reportable segments..............   $   990        $ 1,549        $ 1,445
Other operating loss(2).....................................      (134)          (208)          (157)
Realized investment gains...................................       209             31             72
Cumulative effect of changes in accounting principles, net
  of minority interest......................................         3             --           (112)
Restructuring charge........................................        (3)            --             --
Minority interest...........................................        --            (60)          (224)
                                                               -------        -------        -------
     Total consolidated net income..........................   $ 1,065        $ 1,312        $ 1,024
                                                               =======        =======        =======
ASSET RECONCILIATION
Total assets for reportable segments........................   $56,604        $53,127        $50,375
Other assets(3).............................................     1,174            723            420
                                                               -------        -------        -------
     Total consolidated assets..............................   $57,778        $53,850        $50,795
                                                               =======        =======        =======


---------------
(1) The source of other revenues is businesses that are in run-off and are not
    significant.

(2) The primary component of the other operating loss is after-tax interest
    expense of $133 million, $192 million and $155 million in 2001, 2000 and
    1999, respectively.

(3) Other assets consists primarily of the investment in CitiInsurance in 2001
    and 2000, goodwill in each of 2001, 2000 and 1999 and reinsurance
    recoverables of businesses that were in run-off in 1999.

  ENTERPRISE-WIDE DISCLOSURES

     The Company generally does not accumulate revenues by product; therefore,
it would be impracticable to provide revenues from external customers for each
product.

     Revenues from internal customers, foreign revenues and foreign assets are
not significant. The Company does not have revenue from transactions with a
single customer amounting to 10 percent or more of its revenues.

                                       F-22

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. INVESTMENTS

  FIXED MATURITIES

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



                                                                    AT DECEMBER 31, 2001
                                                          -----------------------------------------
                                                                       GROSS UNREALIZED
                                                          AMORTIZED    -----------------     FAIR
                                                            COST       GAINS     LOSSES      VALUE
                                                          ---------    ------    -------    -------
                                                                         (IN MILLIONS)
                                                                                
Mortgage-backed securities -- CMOs and pass-through
  securities............................................   $ 5,559      $107      $ 57      $ 5,609
U.S. Treasury securities and obligations of U.S.
  Government and government agencies and authorities....     1,361        37        15        1,383
Obligations of states, municipalities and political
  subdivisions..........................................    10,843       241        74       11,010
Debt securities issued by foreign governments...........       593        30         5          618
All other corporate bonds...............................     6,918       255       125        7,048
Redeemable preferred stock..............................       187         7        11          183
                                                           -------      ----      ----      -------
     Total..............................................   $25,461      $677      $287      $25,851
                                                           =======      ====      ====      =======




                                                                    AT DECEMBER 31, 2000
                                                          -----------------------------------------
                                                                       GROSS UNREALIZED
                                                          AMORTIZED    -----------------     FAIR
                                                            COST       GAINS     LOSSES      VALUE
                                                          ---------    ------    -------    -------
                                                                         (IN MILLIONS)
                                                                                
Mortgage-backed securities -- CMOs and pass-through
  securities............................................   $ 4,207      $117      $  5      $ 4,319
U.S. Treasury securities and obligations of U.S.
  Government and government agencies and authorities....     1,492        63         2        1,553
Obligations of states, municipalities and political
  subdivisions..........................................     9,757       443         6       10,194
Debt securities issued by foreign governments...........       710        18        11          717
All other corporate bonds...............................     7,918       192       130        7,980
Redeemable preferred stock..............................       248        10        20          238
                                                           -------      ----      ----      -------
     Total..............................................   $24,332      $843      $174      $25,001
                                                           =======      ====      ====      =======


     The amortized cost and fair value of fixed maturities by contractual
maturity follow. Actual maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.



                                                              AT DECEMBER 31, 2001
                                                              --------------------
                                                              AMORTIZED     FAIR
                                                                COST        VALUE
                                                              ---------    -------
                                                                 (IN MILLIONS)
                                                                     
Due in one year or less.....................................   $   788     $   801
Due after 1 year through 5 years............................     3,626       3,739
Due after 5 years through 10 years..........................     5,339       5,402
Due after 10 years..........................................    10,149      10,300
                                                               -------     -------
                                                                19,902      20,242
Mortgage-backed securities..................................     5,559       5,609
                                                               -------     -------
     Total..................................................   $25,461     $25,851
                                                               =======     =======


                                       F-23

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

     At December 31, 2001 and 2000, the Company held CMOs classified as
available for sale with a fair value of $3.3 billion and $2.8 billion,
respectively. Approximately 54% and 59% of the Company's CMO holdings are fully
collateralized by GNMA, FNMA or FHLMC securities at December 31, 2001 and 2000,
respectively. In addition, the Company held $2.3 billion and $1.5 billion of
GNMA, FNMA, FHLMC or FHA mortgage-backed pass-through securities classified as
available for sale at December 31, 2001 and 2000, respectively. Virtually all of
these securities are rated Aaa.

     The Company engages in securities lending agreements whereby certain
securities from its portfolio are loaned to other institutions for short periods
of time. The Company generally receives cash collateral from the borrower, equal
to at least the market value of the loaned securities plus accrued interest, and
reinvests it in a short-term investment pool. See note 15. The loaned securities
remain a recorded asset of the Company, however, the Company records a liability
for the amount of the collateral held, representing its obligation to return the
collateral related to these loaned securities, and reports that liability as
part of other liabilities in the consolidated balance sheet. At December 31,
2001 and 2000, the Company held collateral of $1.0 billion and $1.1 billion,
respectively.

     Proceeds from sales of fixed maturities classified as available for sale
were $14.5 billion, $12.5 billion and $10.0 billion in 2001, 2000 and 1999,
respectively. Gross gains of $599 million, $267 million and $193 million and
gross losses of $268 million, $284 million and $182 million, respectively, were
realized on those sales.

  EQUITY SECURITIES

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



                                                                    AT DECEMBER 31, 2001
                                                            -------------------------------------
                                                                      GROSS UNREALIZED
                                                                      -----------------     FAIR
                                                             COST     GAINS     LOSSES     VALUE
                                                            ------    ------    -------    ------
                                                                        (IN MILLIONS)
                                                                               
  Common stocks...........................................  $   92     $ 5        $15      $   82
  Nonredeemable preferred stocks..........................     987      29         15       1,001
                                                            ------     ---        ---      ------
       Total..............................................  $1,079     $34        $30      $1,083
                                                            ======     ===        ===      ======

                                                                    AT DECEMBER 31, 2000
                                                            -------------------------------------
                                                                      GROSS UNREALIZED
                                                                      -----------------     FAIR
                                                             COST     GAINS     LOSSES     VALUE
                                                            ------    ------    -------    ------
                                                                        (IN MILLIONS)
                                                                               
  Common stocks...........................................  $  173     $ 5        $26      $  152
  Nonredeemable preferred stocks..........................     889      17         39         867
                                                            ------     ---        ---      ------
       Total..............................................  $1,062     $22        $65      $1,019
                                                            ======     ===        ===      ======


     Proceeds from sales of equity securities were $455 million, $2.4 billion
and $873 million in 2001, 2000 and 1999, respectively, resulting in gross
realized gains of $61 million, $154 million and $70 million and gross realized
losses of $69 million, $94 million and $45 million, respectively.

                                       F-24

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  MORTGAGE LOANS

     Aggregate annual maturities on mortgage loans are $16 million, $36 million,
$28 million, $9 million, $15 million and $170 million for 2002, 2003, 2004,
2005, 2006 and 2007 and thereafter, respectively. There are no mortgage loans
which are past due.

     Underperforming mortgage loans, which include delinquent loans, loans in
the process of foreclosure and loans modified at interest rates below market,
were not significant at December 31, 2001 and 2000.

  CONCENTRATIONS

     At December 31, 2001 and 2000, the Company had concentrations of credit
risk in tax-exempt investments of the State of Texas of $1.2 billion and $1.3
billion, respectively, and of the State of New York of $1.0 billion and $1.3
billion, respectively.

     The Company participates in a short-term investment pool maintained by an
affiliate. See note 15.

     Included in fixed maturities are below investment grade assets totaling
$1.7 billion and $1.6 billion at December 31, 2001 and 2000, respectively. The
Company defines its below investment grade assets as those securities rated
"Ba1" or lower by external rating agencies, or the equivalent by internal
analysts when a public rating does not exist. Such assets include publicly
traded below investment grade bonds and certain other privately issued bonds
that are classified as below investment grade loans.

     The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and other
monitoring procedures. Collateral for fixed maturities often includes pledges of
assets, including stock and other assets, guarantees and letters of credit.

  NET INVESTMENT INCOME



                                                           FOR THE YEAR ENDED DECEMBER 31,
                                                           -------------------------------
                                                             2001        2000        1999
                                                           --------    --------    --------
                                                                    (IN MILLIONS)
                                                                          
Gross investment income:

  Fixed maturities.......................................   $1,700      $1,708      $1,699
  Mortgage loans.........................................       28          58          68
  Other, including trading...............................      352         436         385
                                                            ------      ------      ------
                                                             2,080       2,202       2,152
Investment expenses......................................       46          40          59
                                                            ------      ------      ------
Net investment income....................................   $2,034      $2,162      $2,093
                                                            ======      ======      ======


                                       F-25

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  REALIZED AND UNREALIZED INVESTMENT GAINS (LOSSES)

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



                                                             FOR THE YEAR ENDED DECEMBER 31,
                                                            ---------------------------------
                                                             2001         2000         1999
                                                            -------      -------      -------
                                                                      (IN MILLIONS)
                                                                             
REALIZED

Fixed maturities..........................................   $331         $(17)        $ 11
Equity securities.........................................     (8)          60           25
Mortgage loans............................................     --           10           29
Real estate held for sale.................................     --           13           50
Other.....................................................     --          (19)          (3)
                                                             ----         ----         ----
Realized investment gains.................................   $323         $ 47         $112
                                                             ====         ====         ====



     Included in net realized investment gains were impairment charges related
to other than temporary declines in value of $146 million, $31 million, $43
million for the years ended December 31, 2001, 2000 and 1999, respectively.


     Changes in net unrealized gains (losses) on investment securities that are
included as a separate component of accumulated other changes in equity from
nonowner sources were as follows:



                                                           FOR THE YEAR ENDED DECEMBER 31,
                                                          ---------------------------------
                                                            2001        2000        1999
                                                          --------    --------    ---------
                                                                    (IN MILLIONS)
                                                                         
UNREALIZED

Fixed maturities........................................   $ (279)     $1,074      $(1,803)
Equity securities.......................................       47        (138)          63
Other...................................................       --          --            1
                                                           ------      ------      -------
                                                             (232)        936       (1,739)
Related taxes...........................................      (80)        326         (608)
Change in minority interest.............................       --         (31)         187
                                                           ------      ------      -------
Change in unrealized gains (losses) on investment
  securities............................................     (152)        579         (944)
Balance, beginning of year..............................      408        (171)         773
                                                           ------      ------      -------
Balance, end of year....................................   $  256      $  408      $  (171)
                                                           ======      ======      =======


5. REINSURANCE

     The Company participates in reinsurance in order to limit losses, minimize
exposure to large risks, provide additional capacity for future growth and to
effect business-sharing arrangements. In addition, the Company assumes 100% of
the workers' compensation premiums written by the Accident Department of its
affiliate, The Travelers Insurance Company (TIC). The Company is also a member
of and participates as a servicing carrier for several pools and associations.

     Reinsurance is placed on both a quota-share and excess of loss basis.
Reinsurance ceded arrangements do not discharge the Company as the primary
insurer, except for cases involving a novation.

                                       F-26

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A summary of reinsurance financial data reflected within the consolidated
statement of income is presented below:



                                                           FOR THE YEAR ENDED DECEMBER 31,
                                                          ---------------------------------
                                                            2001         2000        1999
                                                          ---------    --------    --------
                                                                    (IN MILLIONS)
                                                                          
WRITTEN PREMIUMS
Direct..................................................   $10,991      $9,763      $9,056
Assumed from:
  Affiliated companies..................................       144         197         208
  Non-affiliated companies..............................       534         688         519
Ceded to:
  Affiliated companies..................................      (120)       (105)        (42)
  Non-affiliated companies..............................    (1,703)     (1,700)     (1,528)
                                                           -------      ------      ------
     Total net written premiums.........................   $ 9,846      $8,843      $8,213
                                                           =======      ======      ======
EARNED PREMIUMS
Direct..................................................   $10,458      $9,357      $8,869
Assumed from:
  Affiliated companies..................................       181         218         194
  Non-affiliated companies..............................       598         647         538
Ceded to:
  Affiliated companies..................................      (113)       (100)        (43)
  Non-affiliated companies..............................    (1,713)     (1,660)     (1,549)
                                                           -------      ------      ------
     Total net earned premiums..........................   $ 9,411      $8,462      $8,009
                                                           =======      ======      ======
Percentage of amount assumed to net earned..............       8.3%       10.2%        9.1%
                                                           -------      ------      ------
Ceded claims incurred...................................   $ 1,845      $1,248      $1,500
                                                           =======      ======      ======


     Reinsurance recoverables, net of valuation allowance, include amounts
recoverable on unpaid and paid claims and were as follows:



                                                               AT DECEMBER 31,
                                                              -----------------
                                                               2001       2000
                                                              -------    ------
                                                                (IN MILLIONS)
                                                                   
REINSURANCE RECOVERABLES
Property casualty business:
  Pools and associations....................................  $ 2,082    $2,407
  Non-affiliated companies..................................    8,019     6,096
  Affiliated companies......................................      826       811
Accident and health business:
  Affiliated companies......................................      120       130
                                                              -------    ------
     Total reinsurance recoverables.........................  $11,047    $9,444
                                                              =======    ======


     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). Amounts recoverable from unaffiliated insurers at December
31, 2001 and 2000 include $248 million and $295 million, respectively,
recoverable from Equitas. The outcome of the restructuring of Lloyd's is
uncertain and the impact, if any, on collectibility of amounts recoverable by
the Company from Equitas cannot be quantified at this time. It is
                                       F-27

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 which is not
allocated to any specific proceedings or disputes, whether for financial
impairments or coverage defenses. This allowance was $286 million and $213
million at December 31, 2001 and 2000, respectively. Including this allowance,
in the opinion of the Company's management, the net receivable from reinsurance
contracts is appropriately stated.

6. INSURANCE CLAIMS RESERVES

     Claims and claim adjustment expense reserves were as follows:



                                                               AT DECEMBER 31,
                                                              ------------------
                                                               2001       2000
                                                              -------    -------
                                                                (IN MILLIONS)
                                                                   
Claims and claim adjustment expense reserves:
  Property casualty.........................................  $30,617    $28,312
  Accident and health.......................................      120        130
                                                              -------    -------
     Total..................................................  $30,737    $28,442
                                                              =======    =======


     The table below is a reconciliation of beginning and ending property
casualty reserve balances for claims and claim adjustment expenses.



                                                              FOR THE YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                2001        2000        1999
                                                              --------    --------    --------
                                                                       (IN MILLIONS)
                                                                             
Claims and claim adjustment expense reserves at beginning of
  year......................................................  $28,312     $28,854     $29,411
Less reinsurance recoverables on unpaid losses..............    8,877       8,871       8,648
                                                              -------     -------     -------
Net balance at beginning of year............................   19,435      19,983      20,763
                                                              -------     -------     -------
Provision for claims and claim adjustment expenses for
  claims arising in the current year........................    7,599       6,509       6,194
Estimated claims and claim adjustment expenses for claims
  arising in prior years....................................      (41)       (247)       (242)
Acquisitions................................................      623          --          --
                                                              -------     -------     -------
     Total increases........................................    8,181       6,262       5,952
                                                              -------     -------     -------
Claims and claim adjustment expense payments for claims
  arising in:
  Current year..............................................    3,045       2,728       2,573
  Prior years...............................................    4,374       4,082       4,159
                                                              -------     -------     -------
     Total payments.........................................    7,419       6,810       6,732
                                                              -------     -------     -------
Net balance at end of year..................................   20,197      19,435      19,983
Plus reinsurance recoverables on unpaid losses..............   10,420       8,877       8,871
                                                              -------     -------     -------
Claims and claim adjustment expense reserves at end of
  year......................................................  $30,617     $28,312     $28,854
                                                              =======     =======     =======


     The increase in the claims and claim adjustment expense reserves in 2001
from 2000 was primarily due to the additional reserves recorded as part of the
acquisition and contribution of certain affiliates (see

                                       F-28

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

note 2), and the impact of the terrorist attack on September 11th, 2001.
Partially offsetting the above were net payments of $427 million in 2001 for
environmental and cumulative injury claims.

     The decrease in the claims and claim adjustment expense reserves in 2000
from 1999 was primarily attributable to net payments of $341 million for
environmental and cumulative injury claims.

     In 2001, estimated claims and claim adjustment expenses for claims arising
in prior years included net favorable loss development on Commercial Lines loss
sensitive policies in various lines; however, since the business to which it
relates is subject to premium adjustments, there is no impact on results of
operations. In addition, estimated claims and claim adjustment expenses for
claims arising in prior years also included approximately $109 million of net
unfavorable development, primarily related to certain Commercial Lines
coverages, predominately in general liability, commercial auto liability,
assumed reinsurance and specialty businesses partially offset by favorable
development in commercial multi-peril and other claim adjustment expenses.

     In 2000, estimated claims and claim adjustment expenses for claims arising
in prior years included approximately $76 million primarily relating to net
favorable development in certain Commercial Lines coverages, predominantly in
the commercial multi-peril line of business, and in certain Personal Lines
coverages, predominately personal umbrella coverages. In addition, in 2000
Commercial Lines experienced favorable loss development on loss sensitive
policies in various lines; however, since the business to which it relates is
subject to premium adjustments, there is no impact on results of operations.

     In 1999, estimated claims and claim adjustment expenses for claims arising
in prior years included approximately $205 million primarily relating to net
favorable development in certain Personal Lines coverages, predominantly
automobile coverages, and in certain Commercial Lines coverages, predominantly
in the general liability and commercial multi-peril lines of business. In
addition, in 1999 Commercial Lines experienced favorable loss development on
loss sensitive policies in the workers' compensation line; however, since the
business to which it relates is subject to premium adjustments, there was no
impact on results of operations.

     The claims and claim adjustment expense reserves included $1.2 billion and
$1.4 billion for asbestos and environmental-related claims net of reinsurance at
December 31, 2001 and 2000, respectively.

     It is difficult to estimate the reserves for environmental and
asbestos-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. Conventional actuarial techniques are not used to estimate
such reserves.

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

                                       F-29

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In establishing the Company's asbestos reserves, the Company evaluates the
exposure presented by each insured. In the course of this evaluation, the
Company considers available insurance coverage, including the role any umbrella
or excess insurance the Company has issued to the insured; limits and
deductibles; an analysis of each insured's potential liability; the
jurisdictions involved; past and anticipated future claim activity; 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 product/completed operation claim subject to an
aggregate limit and the available coverage, if any, for that claim. Once the
gross ultimate exposure for indemnity and allocated claim adjustment expense is
determined for each insured by each policy year, the Company calculates a ceded
reinsurance projection based on any applicable facultative and treaty
reinsurance, as well as past ceded experience. Adjustments to the ceded
projections also occur due to actual ceded claim experience and reinsurance
collections.

     Historically, the Company's experience has indicated that insureds with
potentially significant environmental and/or asbestos exposures often have other
cumulative injury other than asbestos (CIOTA) exposures or CIOTA claims pending
with it. Due to this experience and the fact that settlement agreements with
insureds may extinguish the Company's obligations for all claims, the Company
evaluates and considers the environmental and asbestos reserves in conjunction
with the CIOTA reserve.

     The Company also compares its historical direct and net loss and expense
paid experience, year-by-year, to assess any emerging trends, fluctuations or
characteristics suggested by the aggregate paid activity. The comparison
includes a review of the result derived from the division of the ending direct
and net reserves by last year's direct and net paid activity, also known as the
survival ratio.

     The reserves carried for environmental and asbestos claims at December 31,
2001 are the Company's best estimate of ultimate claims and claim adjustment
expenses based upon known facts and current law. However, the uncertainties
surrounding the final resolution of these claims continue. These include,
without limitation, the risks inherent in major litigation, including more
aggressive asbestos litigation against insurers, including the Company, 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 issued by the Company for such claims, whether or not an
asbestos claim is a product/completed operation claim subject to an aggregate
limit and the available coverage, if any, for that claim, the number and outcome
of direct actions against the Company and unanticipated developments pertaining
to the Company's ability to recover reinsurance for environmental and asbestos
claims. It is also not possible to predict changes in the legal and legislative
environment and their impact on the future development of asbestos and
environmental claims. Such development will be affected by future court
decisions and interpretations, as well as changes in applicable legislation. In
addition, particularly during the last few months of 2001 and continuing into
2002, the asbestos-related trends described above have both accelerated and
become more visible. These trends include, but are not limited to, the filing of
additional claims, more aggressive litigation based on novel theories of
liability and litigation against new and previously peripheral defendants, and
developments in existing and pending bankruptcy proceedings.


     Because of the uncertainties set forth above, additional liabilities may
arise for amounts in excess of the current related reserves. These additional
amounts, or a range of these additional amounts, cannot now be reasonably
estimated and could result in liability exceeding these reserves by an amount
that could be material to the Company's operating results and financial
condition in future periods. Prior to the completion of the offerings, the
Company will enter into an agreement with Citigroup which will provide that in
any year the Company records additional asbestos related income statement
charges in excess of $150 million, net of any reinsurance, Citigroup will pay
the Company the amount of any such excess up to


                                       F-30

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

a cumulative aggregate of $800 million, reduced by the tax effect of the highest
applicable federal income tax rate, which the Company believes will
substantially enhance its ability to manage possible adverse developments in the
future.

7. TERRORIST ATTACK ON SEPTEMBER 11TH

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

8. DEBT

     In conjunction with the purchase of TIGHI's outstanding shares in April
2000 (see note 2), TPC entered into a note agreement with Citicorp. Interest
accrues on the aggregate principal amount of advances outstanding at the
commercial paper rate (the then current short-term rate). Interest is compounded
monthly. Advances may be borrowed, repaid without penalty, and reborrowed until
April 24, 2005. All advances, including reborrowing, are at the sole discretion
of the lender. At December 31, 2001 and 2000, the principal balance outstanding
was $1.2 billion and $1.9 billion, respectively. All or a portion of this debt
is expected to be repaid with proceeds of the offerings. See note 1.

     On April 13, 2001, TIGHI entered into a $500 million line of credit
agreement with Citicorp Banking Corporation, an affiliate. On April 16, 2001,
TIGHI borrowed $275 million on the line of credit. Proceeds from this borrowing
together with $225 million of commercial paper proceeds were used to pay the
$500 million 6.75% long-term note payable which was due on April 16, 2001. On
November 8, 2001, TIGHI borrowed another $225 million under the line of credit.
The proceeds were used to pay off maturing commercial paper. The maturity for
all $500 million borrowed under this line was extended to November 7, 2003, and
the interest rate was fixed at 3.60%.

     TIGHI has a $250 million revolving line of credit from Citigroup. TIGHI
pays a commitment fee to Citigroup for that line of credit, which expires in
2006. This agreement became effective on December 19, 2001 and replaced a
previous facility with a syndicate of banks. The interest rate for borrowings
under this committed line is based on the cost of commercial paper issued by
Citicorp. At December 31, 2001, there were no borrowings outstanding under this
line of credit. TIGHI also issues commercial paper directly to investors and
maintain unused credit availability under the committed credit facility at least
equal to the amount of commercial paper outstanding. At December 31, 2001, there
was no commercial paper outstanding.

     At December 31, 2000, TPC had a note payable to PFS Services, Inc., its
direct parent. The principal balance outstanding was $287 million. Interest
accrued at a rate of 5.06%, compounded semi-annually. On March 29, 2001, this
note was repaid in its entirety, plus accrued interest.

     On each of September 1, 1999 and October 1, 1999, TIGHI repaid $200 million
for its 6.75% note and 6.25% note, respectively, which matured on those dates.

                                       F-31

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Long-term debt outstanding was as follows:



                                                              AT DECEMBER 31,
                                                              ----------------
                                                               2001      2000
                                                              ------    ------
                                                               (IN MILLIONS)
                                                                  
6.75% Notes due 2001........................................   $ --      $500
6.75% Notes due 2006........................................    150       150
7.81% Note due 2011.........................................     30        --
7.75% Notes due 2026........................................    200       200
                                                               ----      ----
     Total..................................................   $380      $850
                                                               ====      ====


     TPC's primary source of funds for debt service is dividends from
subsidiaries which are subject to various restrictions. See note 10.

9. FEDERAL INCOME TAXES



                                                              FOR THE YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                2001        2000        1999
                                                              --------    --------    --------
                                                                       (IN MILLIONS)
                                                                             
EFFECTIVE TAX RATE
Income before federal income taxes and cumulative effect of
  changes in accounting principles..........................   $1,389      $1,864      $1,839
Statutory tax rate..........................................       35%         35%         35%
                                                               ------      ------      ------
Expected federal income taxes...............................      486         652         644
Tax effect of:
  Nontaxable investment income..............................     (169)       (166)       (168)
  Other, net................................................       10           6           3
                                                               ------      ------      ------
Federal income taxes........................................   $  327      $  492      $  479
                                                               ======      ======      ======
Effective tax rate..........................................       24%         26%         26%
                                                               ======      ======      ======
COMPOSITION OF FEDERAL INCOME TAXES
Current expense:
  United States.............................................   $  311      $  308      $  258
  Foreign...................................................        5          17           9
                                                               ------      ------      ------
     Total..................................................      316         325         267
                                                               ------      ------      ------
Deferred expense:
  United States.............................................       11         167         212
                                                               ------      ------      ------
Federal income tax expense..................................   $  327      $  492      $  479
                                                               ======      ======      ======


                                       F-32

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The net deferred tax assets comprise the tax effects of temporary
differences related to the following assets and liabilities:



                                                              AT DECEMBER 31,
                                                              ---------------
                                                               2001     2000
                                                              ------   ------
                                                               (IN MILLIONS)
                                                                 
Deferred tax assets:
  Claims and claim adjustment expense reserves..............  $  944   $  980
  Unearned premium reserves.................................     323      260
  Employee benefits.........................................     136      132
  Insurance-related assessments.............................      52       65
  Acquisition-related reserves..............................      33       50
  Other.....................................................     173      182
                                                              ------   ------
     Total..................................................   1,661    1,669
                                                              ------   ------
Deferred tax liabilities:
  Investments...............................................     145      288
  Deferred acquisition costs................................     268      215
  Other.....................................................      66       69
                                                              ------   ------
     Total..................................................     479      572
                                                              ------   ------
Net deferred tax asset......................................  $1,182   $1,097
                                                              ======   ======


     The Company is included in the consolidated federal income tax return filed
by Citigroup. Citigroup allocates federal income taxes to its subsidiaries on a
separate return basis adjusted for credits and other amounts required by the
consolidation process. Any resulting liability is paid currently to Citigroup.
Any credits for losses will be paid by Citigroup currently to the extent that
such credits are for tax benefits that have been utilized in the consolidated
federal income tax return.

     In the event that the consolidated return develops an alternative minimum
tax (AMT), each company with an AMT on a separate company basis will be
allocated a portion of the consolidated AMT. Settlement of the AMT will be made
in the same manner and timing as the regular tax.

     In the opinion of the Company's management, the realization of the
recognized net deferred tax asset of $1.2 billion is more likely than not based
on existing carryback ability and expectations as to future taxable income.
Citigroup has reported pretax financial statement income of approximately $20
billion on average over the last three years and has generated federal taxable
income exceeding $13 billion on average in each year during this same period.

     Management also believes that on a separate reporting basis the realization
of the recognized deferred tax asset of $1.2 billion is more likely than not
based on existing carryback ability and expectations as to future taxable income
of the Company. The Company has reported pretax financial statement income of
$1.6 billion, on average over the last three years and has generated federal
taxable income exceeding $770 million, on average, in each year during the same
period.

10. SHAREHOLDER'S EQUITY AND DIVIDEND AVAILABILITY

  MANDATORILY REDEEMABLE SECURITIES OF SUBSIDIARY TRUSTS

     TIGHI formed statutory business trusts under the laws of the State of
Delaware, which exist for the exclusive purposes of (i) issuing Trust Securities
representing undivided beneficial interests in the assets of the Trust; (ii)
investing the gross proceeds of the Trust Securities in Junior Subordinated
Deferrable Interest Debentures (Junior Subordinated Debentures) of its parent;
and (iii) engaging in only those

                                       F-33

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

activities necessary or incidental thereto. These Junior Subordinated Debentures
and the related income effects are eliminated in the consolidated financial
statements. The financial structure of each of Travelers P&C Capital I and
Travelers P&C Capital II (the subsidiary trusts) at December 31, 2001 and 2000
was as follows:



                                                        TRAVELERS P&C     TRAVELERS P&C
                                                          CAPITAL I        CAPITAL II
                                                        --------------    -------------
                                                                    
TRUST SECURITIES (TIGHI SECURITIES)
Issuance date.........................................      April 1996         May 1996
Securities issued.....................................      32,000,000        4,000,000
Liquidation preference per security...................             $25              $25
Liquidation value (in millions).......................            $800             $100
Coupon rate...........................................           8.08%            8.00%
Distributions payable.................................       Quarterly        Quarterly
Distributions guaranteed by (1).......................           TIGHI            TIGHI
Common Securities issued to TIGHI.....................         989,720          123,720

JUNIOR SUBORDINATED DEBENTURES (TIGHI DEBENTURES)
Amount owned (in millions)............................            $825             $103
Coupon rate...........................................           8.08%            8.00%
Interest payable......................................       Quarterly        Quarterly
Maturity date.........................................  April 30, 2036     May 15, 2036
Redeemable by issuer on or after......................  April 30, 2001     May 15, 2001


---------------
(1) Under the arrangements, taken as a whole, payments due are fully and
    unconditionally guaranteed on a subordinated basis.

     The subsidiary trusts will use the proceeds from any redemption of TIGHI
Securities to redeem a like amount of TIGHI Debentures.

     The obligations of TIGHI with respect to the TIGHI Debentures, when
considered together with certain undertakings of TIGHI with respect to the
subsidiary trusts, constitute full and unconditional guarantees by TIGHI of the
subsidiary trusts' obligations under the respective TIGHI Securities. The TIGHI
Securities are classified in the consolidated balance sheet as "TIGHI-obligated
mandatory redeemable securities of subsidiary trusts holding solely junior
subordinated debt securities of TIGHI" at their liquidation value of $900
million. TIGHI has the right, at any time, to defer payments of interest on the
TIGHI Debentures, and consequently the distributions on the TIGHI Securities and
common securities would be deferred (though such distributions would continue to
accrue with interest thereon since interest would accrue on the TIGHI Debentures
during any such extended interest payment period). TIGHI cannot pay dividends on
its common stock during such deferments. Distributions on the TIGHI Securities
have been classified as interest expense in the consolidated statement of
income.

  DIVIDENDS

     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 $1.0
billion will be available by the end of 2002 for such dividends without prior
approval of the Connecticut Insurance Department. However, the payment of a
significant 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. See note 1.

                                       F-34

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  STATUTORY NET INCOME AND SURPLUS

     Statutory net income of TPC's insurance subsidiaries was $1.1 billion, $1.4
billion and $1.4 billion for the years ended December 31, 2001, 2000 and 1999,
respectively. Statutory capital and surplus of TIGHI's insurance subsidiaries
was $7.7 billion and $6.9 billion at December 31, 2001 and 2000, respectively.
Effective January 1, 2001, the Company began preparing its statutory basis
financial statements in accordance with the revised Manual subject to any
deviations prescribed or permitted by its domicilary insurance commissioner (see
note 1, Summary of Significant Accounting Policies, Permitted Statutory
Accounting Practices). The impact of this change was an increase to the
statutory capital and surplus of the Company's insurance subsidiaries of
approximately $350 million. In addition, the acquisition of The Northland
Company, Associates Lloyds Insurance Company and the contribution of CitiCapital
Insurance Company (see note 2) increased the statutory capital and surplus of
the Company's insurance subsidiaries by approximately $340 million as of
December 31, 2001.

                                       F-35

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  ACCUMULATED OTHER CHANGES IN EQUITY FROM NONOWNER SOURCES, NET OF TAX

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



                                                           FOR THE YEAR ENDED DECEMBER 31,
                                            -------------------------------------------------------------
                                                NET                         CUMULATIVE        ACCUMULATED
                                            UNREALIZED                  EFFECT OF CHANGE IN      OTHER
                                               GAINS        FOREIGN         ACCOUNTING        CHANGES IN
                                            (LOSSES) ON    CURRENCY       FOR DERIVATIVE      EQUITY FROM
                                            INVESTMENT    TRANSLATION     INSTRUMENTS AND      NONOWNER
                                            SECURITIES    ADJUSTMENT    HEDGING ACTIVITIES      SOURCES
                                            -----------   -----------   -------------------   -----------
                                                                    (IN MILLIONS)
                                                                                  
BALANCE, JANUARY 1, 1999..................     $ 773         $ (8)             $ --              $765
Net unrealized losses on investment
  securities, net of tax of ($782)........      (921)          --                --              (921)
Less: Reclassification adjustment for
  gains included in net income, net of tax
  of ($13)................................       (23)          --                --               (23)
Foreign currency translation adjustment,
  net of tax of $3........................        --            8                --                 8
                                               -----         ----              ----              ----
Current period change.....................      (944)           8                --              (936)
                                               -----         ----              ----              ----
BALANCE, DECEMBER 31, 1999................      (171)          --                --              (171)
Net unrealized gains on investment
  securities, net of tax of $371..........       608           --                --               608
Less: Reclassification adjustment for
  gains included in net income, net of tax
  of ($14)................................       (29)          --                --               (29)
Foreign currency translation adjustment,
  net of tax of ($1)......................        --           (7)               --                (7)
                                               -----         ----              ----              ----
Current period change.....................       579           (7)               --               572
                                               -----         ----              ----              ----
BALANCE, DECEMBER 31, 2000................       408           (7)               --               401
Net unrealized gains on investment
  securities obtained as part of affiliate
  acquisition, net of tax of $12..........        21           --                --                21
Net unrealized gains on investment
  securities, net of tax of $21...........        37           --                --                37
Less: Reclassification adjustment for
  gains included in net income, net of tax
  of ($113)...............................      (210)          --                --              (210)
Foreign currency translation adjustment,
  net of tax of $--.......................        --           (3)               --                (3)
Other, net of tax of ($2).................        --           --                (4)               (4)
                                               -----         ----              ----              ----
Current period change.....................      (152)          (3)               (4)             (159)
                                               -----         ----              ----              ----
BALANCE, DECEMBER 31, 2001................     $ 256         $(10)             $ (4)             $242
                                               =====         ====              ====              ====


                                       F-36

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. BENEFIT PLANS

  POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

     TPC sponsors a postretirement health care and life insurance benefit plan
for certain eligible retired employees of the Company and an affiliate. The
following tables summarize the components of net benefit expense and the funded
status related to this plan. The Company's components of net benefit expense
recognized in the consolidated statement of income and the amounts recognized in
the consolidated balance sheet are noted below each table.

                              NET BENEFIT EXPENSE



                                                               FOR THE YEAR ENDED
                                                                  DECEMBER 31,
                                                              --------------------
                                                              2001    2000    1999
                                                              ----    ----    ----
                                                                 (IN MILLIONS)
                                                                     
Benefits earned during the year.............................  $ 1     $ 1     $--
Interest cost on benefit obligation.........................   24      25      24
Amortization of unrecognized:
  Prior service cost........................................   (2)     (2)     (2)
  Net actuarial gain........................................   (4)     (6)     (4)
                                                              ---     ---     ---
NET BENEFIT EXPENSE.........................................  $19     $18     $18
                                                              ===     ===     ===


     The net benefit expense recognized by the Company was $17 million for each
of the years ended December 31, 2001, 2000 and 1999. The remaining expense is
recorded in the consolidated statement of income of an affiliate.

                               BENEFIT OBLIGATION



                                                              AT DECEMBER 31,
                                                              ---------------
                                                               2001     2000
                                                              ------   ------
                                                               (IN MILLIONS)
                                                                 
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year.....................  $ 347    $ 319
Benefits earned during the year.............................      1        1
Interest cost on benefit obligation.........................     24       25
Actuarial (gain) loss.......................................     (3)      31
Benefits paid...............................................    (32)     (29)
                                                              -----    -----
BENEFIT OBLIGATION AT END OF YEAR...........................  $ 337    $ 347
                                                              =====    =====
RECONCILIATION OF ACCRUED BENEFIT LIABILITY AND TOTAL AMOUNT
  RECOGNIZED
Funded status of plan.......................................  $(337)   $(347)
Unrecognized:
  Prior service cost........................................    (10)     (12)
  Net actuarial gain........................................    (43)     (44)
                                                              -----    -----
NET AMOUNT RECOGNIZED.......................................  $(390)   $(403)
                                                              =====    =====


     The amount included in other liabilities in the Company's consolidated
balance sheet as of December 31, 2001 and 2000 was $222 million and $223
million, respectively, and consists only of the

                                       F-37

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

accrued benefit liability. The remaining liability is recorded in the
consolidated balance sheet of an affiliate.

     The principal assumptions used in determining the postretirement benefit
obligation are shown in the following table:



                                                                AT DECEMBER 31,
                                                                ----------------
                                                                2001       2000
                                                                -----      -----
                                                                     
Discount rate...............................................    7.25%       7.5%
Future compensation increase rate...........................     4.5%       4.5%
Health care cost increase rate (ultimate rate):
  Following year............................................     8.0%       7.0%
  Decreasing to the year 2005...............................     5.0%        --
  Decreasing to the year 2008...............................      --        5.0%


     As an indicator of sensitivity, increasing the assumed health care cost
trend rate by 1% in each year would have increased the accumulated
postretirement benefit obligation as of December 31, 2001 by $3 million and the
aggregate of the benefits earned and interest components of 2001 net
postretirement benefit expense by less than $1 million. Decreasing the assumed
health care cost trend rate by 1% in each year would have decreased the
accumulated postretirement benefit obligation as of December 31, 2001 by $3
million and the aggregate of the benefits earned and interest components of 2001
net postretirement benefit expense by less than $1 million.

     In connection with the corporate reorganization, and contingent on the
distribution occurring, the Company currently intends on retaining all
postretirement health care and life insurance liabilities for all active
employees of the Company. All other liabilities for retired or inactive
employees, which represents the majority of such liabilities, will remain with
Citigroup.

  PENSION BENEFITS

     The Company participates in a qualified, noncontributory defined benefit
pension plan sponsored by an affiliate. The Company's share of net expense or
income for this plan was not significant for 2001, 2000 and 1999.

     In connection with the corporate reorganization, and contingent on the
distribution, the Company intends to establish a separate defined benefit
pension plan. The Company expects that this plan will cover the active employees
of the Company. Retirees and inactive employees are expected to remain with the
Citigroup sponsored pension plan.

  401(k) SAVINGS PLAN

     Substantially all employees of the Company are eligible to participate in a
401(k) savings plan sponsored by Citigroup. There were no Company matching
contributions for substantially all employees.

12. LEASES

     Most leasing functions for TPC and its subsidiaries are administered by the
Company. See note 15. Rent expense related to these leases is shared by the
companies on a cost allocation method based generally on estimated usage by
department. Rent expense was $121 million, $113 million and $112 million in
2001, 2000 and 1999, respectively. See note 1.

     Future minimum annual rentals under noncancellable operating leases are
$111 million, $85 million, $56 million, $44 million, $23 million and $112
million for 2002, 2003, 2004, 2005, 2006 and 2007 and

                                       F-38

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

thereafter, respectively. Future sublease rental income of approximately $18
million will partially offset these commitments.

13. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

  DERIVATIVE FINANCIAL INSTRUMENTS

     The Company uses derivative financial instruments, including interest rate
swaps, equity swaps, options, financial futures and forward contracts, as a
means of hedging exposure to interest rate, equity price change and foreign
currency risk. The Company's insurance subsidiaries do not hold or issue
derivatives for trading purposes. In 2000, these derivative financial
instruments were treated as off-balance-sheet risk and were not significant.

     Beginning January 1, 2001, the Company adopted FAS 133 which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognizes all derivatives as either assets or
liabilities in the consolidated balance sheet and measure those instruments at
fair value. Where applicable, hedge accounting is used to account for
derivatives.

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

     For fair value hedges, changes in the fair value of derivatives are
reflected in realized investment gains (losses), together with changes in the
fair value of the related hedged item. The Company did not utilize fair value
hedges during the year ended December 31, 2001.

     For cash flow hedges, the accounting treatment depends on the effectiveness
of the hedge. To the extent these derivatives are effective in offsetting the
variability of the hedged cash flows, changes in the derivatives' fair value
will not be included in current earnings but are reported in accumulated other
changes in equity from nonowner sources. These changes in fair value will be
included in the earnings of future periods when earnings are also affected by
the variability of the hedged cash flows. At December 31, 2001, the Company
expects to include realized investment losses of approximately $1 million in
earnings over the next twelve months for these cash flow hedges. To the extent
these derivatives are not effective, changes in their fair value are immediately
included in realized investment gains (losses). The Company's cash flow hedges
primarily include hedges of floating rate available-for-sale securities and
certain forecasted transactions up to a maximum tenure of one year. While the
earnings impact of cash flow hedges are similar to the previous accounting
practice, the amounts included in the accumulated other changes in equity from
nonowner sources will vary depending on market conditions.

     For net investment hedges in which derivatives hedge the foreign currency
exposure of a net investment in a foreign operation, the accounting treatment
will similarly depend on the effectiveness of the hedge. The effective portion
of the change in fair value of the derivative, including any forward premium or
discount, is reflected in the accumulated other changes in equity from nonowner
sources as part of the foreign currency translation adjustment. For the year
ended December 31, 2001, the amount included in the foreign currency translation
adjustment in equity from nonowner sources was a $3 million loss. The
ineffective portion is reflected in realized investment gains (losses).

     Derivatives that are either hedging instruments that are not designated or
do not qualify as hedges under the new rules are also carried at fair value with
changes in value reflected in realized investment

                                       F-39

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

gains (losses). The Company has certain foreign currency forward contracts which
are not designated as hedges at December 31, 2001.

     The effectiveness of these hedging relationships is evaluated on a
retrospective and prospective basis using quantitative measures of correlation.
If a hedge relationship is found to be ineffective, it no longer qualifies as a
hedge, and any excess gains or losses attributable to such ineffectiveness as
well as subsequent changes in fair value are recognized in realized investment
gains (losses). During the year ended December 31, 2001, there was no hedge
ineffectiveness that was recognized in realized investment gains (losses).

     For those hedge relationships that are terminated, hedge designations
removed, or forecasted transactions that are no longer expected to occur, the
hedge accounting treatment described in the paragraphs above will no longer
apply. For fair value hedges, any changes to the hedged item remain as part of
the basis of the asset and are ultimately reflected as an element of the yield.
For cash flow hedges, any changes in fair value of the end-user derivative
remain in accumulated other changes in equity from nonowner sources, and are
included in earnings of future periods when earnings are also affected by the
variability of the hedged cash flow. If the hedged relationship was discontinued
or a forecasted transaction is not expected to occur when scheduled, any changes
in fair value of the end-user derivative are immediately reflected in realized
investment gains (losses). During the year ended December 31, 2001, there were
no such discontinued forecasted transactions.

     The Company also purchases investments that have embedded derivatives,
primarily convertible debt securities. These embedded derivatives are carried at
fair value with changes in value reflected in realized investment gains
(losses). The Company bifurcates an embedded derivative where: a) the economic
characteristics and risks of the embedded instrument are not clearly and closely
related to the economic characteristics and risks of the host contract, b) the
entire instrument would not otherwise be remeasured at fair value, and c) a
separate instrument with the same terms of the embedded instrument would meet
the definition of a derivative under FAS 133. Derivatives embedded in
convertible debt securities are reported on a combined basis with their host
instrument and are classified as fixed maturity securities.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

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

     At December 31, 2001 and 2000, investments in fixed maturities had a fair
value, which equaled carrying value, of $25.9 billion and $25.0 billion,
respectively. The fair value of investments in fixed maturities for which a
quoted market price or dealer quote are not available was $790 million and $874
million at December 31, 2001 and 2000, respectively.

     The carrying values of cash, trading securities, short-term securities,
mortgage loans and investment income accrued approximated their fair values. See
notes 1 and 4.

     At December 31, 2001 and 2000, the carrying value of $1.7 billion and $2.2
billion, respectively, of the notes payable to affiliates approximated their
fair value. Fair value is based upon discounted cash flows.

     At December 31, 2001 and 2000, the carrying value of $380 million and $850
million, respectively, of long-term debt approximated its fair value. Fair value
is based upon bid price at December 31, 2001 and 2000. At December 31, 2001 and
2000, the TIGHI Debentures had a carrying value of $900 million, which
approximated their fair value. Fair value is based upon the closing price at
December 31, 2001 and 2000.

                                       F-40

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The carrying values of $522 million and $975 million of financial
instruments classified as other assets approximated their fair values at
December 31, 2001 and 2000, respectively. The carrying values of $4.0 billion
and $4.1 billion of financial instruments classified as other liabilities at
December 31, 2001 and 2000, respectively, also approximated their fair values.
Fair value is determined using various methods including discounted cash flows,
as appropriate for the various financial instruments.

14. COMMITMENTS AND CONTINGENCIES

     Commitments

     In the normal course of business, the Company has unfunded commitments to
partnerships. Such commitments were $792 million and $729 million at December
31, 2001 and 2000.

     Litigation

     In the ordinary course of business, the Company is a defendant or
codefendant in various litigation matters other than environmental and asbestos
claims. Although there can be no assurances, as of December 31, 2001, in the
opinion of the Company's management, based on information currently available,
the ultimate resolution of these other legal proceedings would not be likely to
have a material adverse effect on its results of operations, financial condition
or liquidity.

     For environmental and asbestos claims matters see note 6.

15. RELATED PARTY TRANSACTIONS

     The Company provides certain administrative services to TIC. Settlements
for these functions between the Company and its affiliates are made regularly.
Investment advisory and management services and data processing services are
provided by affiliated companies. Charges for these services are shared by the
companies on cost allocation methods based generally on estimated usage by
department.

     An affiliate maintains a short-term investment pool in which the Company
participates. The positions of each company participating in the pool are
calculated and adjusted daily. At December 31, 2001 and 2000, the pool totaled
approximately $5.6 billion and $4.4 billion, respectively. The Company's share
of the pool amounted to $2.4 billion and $2.3 billion at December 31, 2001 and
2000, respectively, and is included in short-term securities in the consolidated
balance sheet.

     The Company participates in the Citigroup Capital Accumulation Plan (CAP).
For the 2000 and 1999 restricted stock awards, participating officers and other
key employees received 50% of their restricted stock award in the form of
Citigroup common stock and received 50% in the form of TIGHI common stock. In
connection with the cash tender offer completed by TPC in 2000, all shares of
restricted common stock under TIGHI CAP were eliminated and substantially all
were replaced with restricted Citigroup common stock. All of the 2001 restricted
stock awards granted on January 16, 2001 were in the form of Citigroup common
stock. Similar to TIGHI CAP these restricted stock awards generally vest after a
three-year period and, except under limited circumstances, the stock can not be
sold or transferred during the restricted period by the participant, who is
required to render service to the Company during the restricted period. Unearned
compensation expense associated with the Citigroup restricted common stock
grants, which represents the market value of Citigroup's common stock at the
date of grant, and the remaining unamortized portion of the previous TIGHI CAP
shares, is included with other assets in the consolidated balance sheet and is
recognized as a charge to income ratably over the vesting period. The after-tax
compensation cost charged to earnings for these restricted stock awards was $19
million, $16 million and $16 million for the years ended December 31, 2001, 2000
and 1999, respectively.

                                       F-41

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

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



                                                           FOR THE YEAR ENDED DECEMBER 31,
                                                           --------------------------------
                                                             2001        2000        1999
                                                           --------    --------    --------
                                                                    (IN MILLIONS)
                                                                          
Net income, as reported..................................   $1,065      $1,312      $1,024
FAS 123 pro forma adjustments, after tax.................      (49)        (51)        (37)
                                                            ------      ------      ------
Net income, pro forma....................................   $1,016      $1,261      $  987
                                                            ======      ======      ======


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



                                                              2001    2000    1999
                                                              -----   -----   -----
                                                                     
Expected volatility of Citigroup Stock......................   38.6%   41.5%   44.1%
Risk-free interest rate.....................................   4.52%   6.23%   5.29%
Expected annual dividend per Citigroup share................  $0.92   $0.78   $0.47
Expected annual forfeiture rate.............................      5%      5%      5%


     In conjunction with the purchase of TIGHI's outstanding shares in April
2000, TPC borrowed $2.2 billion pursuant to a note agreement with Citicorp. At
December 31, 2001 and 2000, the outstanding balance of the note payable to
Citicorp was $1.2 billion and $1.9 billion, respectively. Interest expense
included in the consolidated statement of income was $79 million and $113
million in 2001 and 2000, respectively. See notes 2 and 8.

     At December 31, 2000, the Company had a note payable to PFS Services, Inc.
of $287 million. This was repaid during 2001. Interest expense included in the
consolidated statement of income was $4 million, $49 million and $87 million in
2001, 2000 and 1999, respectively. See note 8.

     On October 1, 2001, the Company paid $329 million to Associates First
Capital Corp., an affiliate, for The Northland Company and its subsidiaries and
Associates Lloyds Insurance Company. In addition, on October 3, 2001, the
capital stock of CitiCapital Insurance Company (formerly known as Associates
Insurance Company), with a net book value of $356 million, was contributed to
the Company. See note 2.

     At December 31, 2001 and 2000, the Company had $102 million of securities
pledged as collateral to Citibank N.A. to support a letter of credit facility
for certain of the Company's surety customers.

     Most leasing functions for TPC and its subsidiaries are administered by the
Company. See note 12. The Company leases furniture and equipment from an
affiliate. The rental expense charged to the

                                       F-42

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company for this furniture and equipment was $18 million, $18 million and $28
million in 2001, 2000 and 1999, respectively.

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

     The Company participates in reinsurance agreements with TIC. See note 5.

     The Company purchases annuities from affiliates to settle certain claims.
Reinsurance recoverables at December 31, 2001 and 2000 included $825 million and
$811 million, respectively, related to these annuities.

16. NONCASH FINANCING AND INVESTING ACTIVITIES

     On October 3, 2001, the capital stock of CitiCapital Insurance Company
(formerly known as Associates Insurance Company), with a net book value of $356
million, was contributed to the Company. See note 2. There were no significant
noncash financing or investing activities for the years ended December 31, 2000
or 1999.

17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)



                                                                      2001
                                               ---------------------------------------------------
                                                FIRST     SECOND      THIRD     FOURTH
                                               QUARTER    QUARTER    QUARTER    QUARTER     TOTAL
                                               -------    -------    -------    -------    -------
                                                                  (IN MILLIONS)
                                                                            
Total revenues...............................  $3,058     $2,983     $3,012     $3,178     $12,231
Total expenses...............................   2,390      2,513      3,165      2,774      10,842
                                               ------     ------     ------     ------     -------
Income (loss) before federal income taxes and
  cumulative effect of changes in accounting
  principles.................................     668        470       (153)       404       1,389
Federal income taxes (benefit)...............     194        125        (93)       101         327
                                               ------     ------     ------     ------     -------
Income (loss) before cumulative effect of
  changes in accounting principles...........     474        345        (60)       303       1,062
Cumulative effect of change in accounting for
  derivative instruments and hedging
  activities, net of tax.....................       4         --         --         --           4
Cumulative effect of change in accounting for
  securitized financial assets, net of tax...      --         (1)        --         --          (1)
                                               ------     ------     ------     ------     -------
Net income (loss)............................  $  478     $  344     $  (60)    $  303     $ 1,065
                                               ======     ======     ======     ======     =======




                                                                      2000
                                               ---------------------------------------------------
                                                FIRST     SECOND      THIRD     FOURTH
                                               QUARTER    QUARTER    QUARTER    QUARTER     TOTAL
                                               -------    -------    -------    -------    -------
                                                                  (IN MILLIONS)
                                                                            
Total revenues...............................  $2,571     $2,706     $2,865     $2,929     $11,071
Total expenses...............................   2,142      2,251      2,355      2,459       9,207
                                               ------     ------     ------     ------     -------
Income before federal income taxes and
  minority interest..........................     429        455        510        470       1,864
Federal income taxes.........................     110        117        139        126         492
Minority interest, net of tax................      49         11         --         --          60
                                               ------     ------     ------     ------     -------
Net income...................................  $  270     $  327     $  371     $  344     $ 1,312
                                               ======     ======     ======     ======     =======


                                       F-43

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


18. PRO FORMA INFORMATION (UNAUDITED)



     The unaudited pro forma earnings per share amounts reflect the
recapitalization we will effect as part of our corporate reorganization. Pro
forma earnings per share does not include the effects of our Capital
Accumulation Program and Stock Option Plan described in the section of this
prospectus entitled "Arrangements Between Our Company and
Citigroup -- Intercompany Transactions During the Past Three Years" as these
plans utilize Citigroup common stock. Conversion of the Citigroup common stock
in these plans to our common stock is contingent upon the distribution
occurring. Pro forma earnings per share also does not reflect conversion of our
convertible junior subordinated notes.


     The Company's unaudited pro forma consolidated balance sheet as of December
31, 2001, reflects the two dividends declared in February 2002 aggregating $4.7
billion due to Citigroup in the form of notes payable (see note 1). Pursuant to
the requirements of the Securities and Exchange Commission, these dividends have
been reflected in the pro forma balance sheet without giving effect to any
receipt of the net proceeds of the initial public offering.

                                       F-44


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

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF
THIS PROSPECTUS.

     UNTIL        , 2002 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE OUR CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

                               210,000,000 SHARES

                       TRAVELERS PROPERTY CASUALTY CORP.

                                 TRAVELERS LOGO

                              CLASS A COMMON STOCK

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

                                   PROSPECTUS

                                     , 2002

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

                               GLOBAL COORDINATOR

                              SALOMON SMITH BARNEY

CREDIT SUISSE FIRST BOSTON
               GOLDMAN, SACHS & CO.
                               LEHMAN BROTHERS
                                             MERRILL LYNCH & CO.
                                                       MORGAN STANLEY


                                                   
BANC OF AMERICA SECURITIES LLC    BEAR, STEARNS & CO.     BLAYLOCK & PARTNERS, L.P.
DEUTSCHE BANC ALEX. BROWN                INC.                              JPMORGAN
NEUBERGER BERMAN LLC               FOX-PITT, KELTON            THE WILLIAMS CAPITAL
                                      UBS WARBURG                       GROUP, L.P.


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


     THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
     MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
     THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
     AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
     THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

                 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

                  SUBJECT TO COMPLETION, DATED MARCH 19, 2002

INTERNATIONAL PROSPECTUS

                               210,000,000 SHARES

                       TRAVELERS PROPERTY CASUALTY CORP.

                                 TRAVELERS LOGO

                              CLASS A COMMON STOCK
                            $             PER SHARE
                               ------------------
    We are selling 210,000,000 shares of our class A common stock. Of the
210,000,000 shares of our class A common stock that we are selling, 42,000,000
shares are being offered outside the United States and Canada by the
international underwriters named in this prospectus and 168,000,000 shares are
being offered at the same time in the United States and Canada by a syndicate of
U.S. underwriters. We have granted the underwriters an option to purchase up to
21,000,000 additional shares of our class A common stock to cover
over-allotments.

    Concurrently with this offering, we are offering $850 million aggregate
principal amount of our      % Convertible Junior Subordinated Notes due 2032.

    This is the initial public offering of our class A common stock. We
currently expect the initial public offering price to be between $16.00 and
$19.00 per share. We have applied to list our class A common stock on the New
York Stock Exchange under the symbol "TAP.A."
                               ------------------
     INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 11.

    Neither the Securities and Exchange Commission nor any state securities or
insurance commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
                               ------------------



                                                                PER SHARE           TOTAL
                                                              --------------    --------------
                                                                          
Public Offering Price.......................................  $                 $
Underwriting Discount.......................................  $                 $
Proceeds to Travelers Property Casualty Corp. (before
  expenses).................................................  $                 $


       The underwriters expect to deliver the shares to purchasers on or about
                                          , 2002.
                               ------------------
                               GLOBAL COORDINATOR

                              SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
           DEUTSCHE BANK
                      GOLDMAN SACHS INTERNATIONAL
                                LEHMAN BROTHERS
                                        MERRILL LYNCH INTERNATIONAL
                                                MORGAN STANLEY
                                                       UBS WARBURG


                                                      
BBVA BOLSA, S.V.                       BNP PARIBAS                               CAZENOVE
CDC IXIS CAPITAL MARKETS       CREDIT LYONNAIS SECURITIES              DRESDNER KLEINWORT
                                                                              WASSERSTEIN
MEDIOBANCA--BANCA DI            SANTANDER CENTRAL HISPANO                  WESTLB PANMURE
CREDITO FINANZIARIO S.P.A.          INVESTMENT, S.A.


            , 2002
                                       I-1

                 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

                                  UNDERWRITING

     The global offering consists of

     - an offering of a total of 42,000,000 shares outside the United States and
       Canada, and

     - an offering of a total of 168,000,000 shares in the United States and
       Canada.

     Salomon Smith Barney is the global coordinator and sole bookrunning manager
of the global offering. Salomon Brothers International Limited, Credit Suisse
First Boston (Europe) Limited, Deutsche Bank AG London, Goldman Sachs
International, Lehman Brothers International (Europe), Merrill Lynch
International, Morgan Stanley & Co. International Ltd and UBS AG, acting through
its business group UBS Warburg, are acting as representatives of the
international underwriters named below. Salomon Smith Barney Inc., Credit Suisse
First Boston Corporation, Goldman, Sachs & Co., Lehman Brothers Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated
are acting as representatives of the U.S. underwriters named below.

     Subject to the terms and conditions stated in the international
underwriting agreement dated the date of this prospectus, each international
underwriter named below has agreed to purchase, and we have agreed to sell to
that underwriter, the number of shares set forth opposite the international
underwriter's name.



                                                                  NUMBER
                        UNDERWRITER                             OF SHARES
                        -----------                             ----------
                                                             
Salomon Brothers International Limited......................
Credit Suisse First Boston (Europe) Limited.................
Deutsche Bank AG London.....................................
Goldman Sachs International.................................
Lehman Brothers International (Europe) .....................
Merrill Lynch International.................................
Morgan Stanley & Co. International Ltd .....................
UBS AG, acting through its business group UBS Warburg.......
BBVA Bolsa Sociedad de Valores, S.A.........................
BNP Paribas.................................................
Cazenove & Co. Ltd .........................................
CDC IXIS Capital Markets....................................
Credit Lyonnais Securities..................................
Dresdner Kleinwort Wasserstein Securities Limited...........
ING Barings Limited as agent for ING Bank N.V., London
  Branch....................................................
MEDIOBANCA -- Banca di Credito Finanziario S.p.A............
Santander Central Hispano Investment, S.A...................
WestLB Panmure Limited......................................
ABN AMRO Rothschild.........................................
Barclays Bank Plc...........................................
Commerzbank Aktiengesellschaft, London Branch...............
Credit Agricole Indosuez....................................
Daiwa Securities SMBC Europe Limited........................
Fortis Bank (Nederland) N.V. ...............................
Fox-Pitt, Kelton N.V. ......................................
HSBC Investment Bank plc....................................
IntesaBci S.p.A. ...........................................
Societe Generale............................................
Unicredit Banca Mobiliare Societa per Azioni................
                                                                ----------
     Total..................................................    42,000,000
                                                                ==========


                                       I-2

                 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

     Subject to the terms and conditions stated in the U.S. underwriting
agreement dated the date of this prospectus, each U.S. underwriter named below
has agreed to purchase, and we have agreed to sell to that underwriter, the
number of shares set forth opposite the underwriter's name.



                                                                  NUMBER
                        UNDERWRITER                              OF SHARES
                        -----------                             -----------
                                                             
Salomon Smith Barney Inc....................................
Credit Suisse First Boston Corporation......................
Goldman, Sachs & Co.........................................
Lehman Brothers Inc.........................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
Morgan Stanley & Co. Incorporated...........................
Banc of America Securities LLC..............................
Bear, Stearns & Co. Inc. ...................................
Blaylock & Partners, L.P. ..................................
Deutsche Banc Alex. Brown Inc. .............................
Fox-Pitt, Kelton Inc. ......................................
J.P. Morgan Securities Inc. ................................
Neuberger Berman LLC........................................
UBS Warburg LLC.............................................
The Williams Capital Group, L.P. ...........................
                                                                -----------
     Total..................................................    168,000,000
                                                                ===========


     The international and U.S. underwriting agreements provide that the
obligations of the underwriters to purchase the shares included in this offering
are subject to approval of legal matters by counsel and to other conditions. The
underwriters are obligated to purchase all the shares (other than those covered
by the over-allotment option described below) if they purchase any of the
shares. The offering price and the total underwriting discounts and commissions
per share for the international offerings and the U.S. offerings are identical,
except as described below in connection with the directed share program. In
addition, the international and U.S. offerings are each conditional on the
closing of the other.

     The underwriters propose to offer some of the shares directly to the public
at the public offering price set forth on the cover page of this prospectus and
some of the shares to dealers at the public offering price less a concession not
to exceed $     per share. The underwriters may allow, and the dealers may
reallow, a concession not to exceed $     per share on sales to other dealers.
If all of the shares are not sold at the initial offering price, the
representatives may change the public offering price and the other selling
terms. The representatives have advised us that the underwriters do not intend
to confirm any sales to any accounts over which they exercise discretionary
authority.

     We have granted to the international underwriters an option, exercisable
for 30 days from the date of this prospectus, to purchase up to
additional shares of class A common stock at the public offering price less the
underwriting discount. The international underwriters may exercise the option
solely for the purpose of covering over-allotments, if any, in connection with
this offering. To the extent the option is exercised, each international
underwriter must purchase a number of additional shares approximately
proportionate to that underwriter's initial purchase commitment. We have also
granted to the U.S. underwriters an option to purchase up to an aggregate of
additional shares on the same terms and conditions. If the international and
U.S. underwriters' options are exercised in full, the total price to the public
for this offering would be $       , the total underwriting discounts would be
$       and the total net proceeds to us would be approximately $  billion.

     The underwriters for each of the offerings have entered into an agreement
in which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares. The U.S. and international underwriters
also have agreed that they may sell shares between their respective
                                       I-3

                 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

underwriting syndicates. The number of shares actually allocated to each
offering may differ from the amount offered due to reallocation between the U.S.
and international offerings.

     Each underwriter has represented, warranted and agreed that:

     - it has not offered or sold and, prior to the expiry of a period of six
       months from the closing date, will not offer or sell any shares included
       in this offering to persons in the United Kingdom except to persons whose
       ordinary activities involve them in acquiring, holding, managing or
       disposing of investments (as principal or agent) for the purposes of
       their businesses or otherwise in circumstances which have not resulted
       and will not result in an offer to the public in the United Kingdom
       within the meaning of the Public Offers of Securities Regulations 1995;

     - it has only communicated and caused to be communicated and will only
       communicate or cause to be communicated any invitation or inducement to
       engage in investment activity (within the meaning of section 21 of the
       Financial Services and Markets Act 2000 ("FSMA")) received by it in
       connection with the issue or sale of any shares included in this offering
       in circumstances in which section 21(1) of the FSMA does not apply to us;

     - it has complied and will comply with all applicable provisions of the
       FSMA with respect to anything done by it in relation to the shares
       included in this offering in, from or otherwise involving the United
       Kingdom;

     - the offer in The Netherlands of the shares included in this offering is
       exclusively limited to persons who trade or invest in securities in the
       conduct of a profession or business (which include banks, stockbrokers,
       insurance companies, pension funds, other institutional investors and
       finance companies and treasury departments of large enterprises);

     - (1) it has not offered or sold and will not offer or sell our class A
       common stock in Hong Kong SAR by means of this prospectus or any other
       document, other than to persons whose ordinary business involves buying
       or selling shares or debentures, whether as principal or agent or in
       circumstances which do not constitute an offer to the public within the
       meaning of the Companies Ordinance (Cap. 32 of the Laws of Hong Kong
       SAR), and (2) unless it is a person who is permitted to do so under the
       securities laws of Hong Kong SAR, it has not issued or held for the
       purpose of issue in Hong Kong and will not issue or hold for the purpose
       of issue in Hong Kong SAR this prospectus, any other offering material or
       any advertisement, invitation or document relating to the class A common
       stock, otherwise than with respect to class A common stock intended to be
       disposed of to persons outside Hong Kong SAR or only to persons whose
       business involves the acquisition, disposal, or holding of securities,
       whether as principal or as agent;

     - the shares of class A common stock offered in this prospectus have not
       been registered under the Securities and Exchange Law of Japan, and it
       has not offered or sold and will not offer or sell, directly or
       indirectly, the class A common stock in Japan or to or for the account of
       any resident of Japan, except (1) pursuant to an exemption from the
       registration requirements of the Securities and Exchange Law and (2) in
       compliance with any other applicable requirements of Japanese law; and

     - it has not offered or sold and will not offer or sell any of the shares
       included in this offering, nor will it circulate or distribute this
       prospectus or any other document or material relating to such shares,
       directly or indirectly, to the public or any member of the public other
       than (1) to an institutional investor or other person specified in
       Section 106C of the Companies Act, Chapter 50 of Singapore (which we
       refer to in this prospectus as the "Singapore Companies Act"), (2) to a
       sophisticated investor, and in accordance with the conditions, specified
       in Section 106D of the Singapore Companies Act or (3) otherwise pursuant
       to, and in accordance with the conditions of, any other applicable
       provision of the Singapore Companies Act.

     We, our officers and directors and Citigroup have agreed that, for a period
of 180 days from the date of this prospectus, we and they will not, without the
prior written consent of Salomon Smith Barney,
                                       I-4

                 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

dispose of or hedge any shares of our common stock or any securities convertible
into or exchangeable for our common stock. However, we may issue our convertible
notes in the concurrent offering and shares of class A common stock upon
conversion of the notes, we may issue shares of common stock in connection with
our corporate reorganization, and we may grant options to purchase shares of
common stock and issue shares of common stock upon the exercise of outstanding
options under our stock option plans. We may also issue restricted shares of
common stock pursuant to our stock incentive plan. In addition, we may issue or
sell common stock in connection with an acquisition or business combination, and
Citigroup may privately transfer shares of common stock, as long as the acquiror
of that common stock agrees in writing to be bound by the obligations and
restrictions of our lock-up agreement for the remainder of the 180-day period.


     At our request, the underwriters have reserved up to 2% of the shares of
class A common stock for sale through a directed share program at the initial
public offering price less an underwriting discount of 3% to persons who are
directors, officers or employees, or independent agents who sell our products.
Robert Lipp, our chairman and chief executive officer, has advised us that he
intends to purchase $15 million of class A common stock in the directed share
program. The number of shares of class A common stock available for sale to the
general public will be reduced by the number of directed shares purchased by
participants in the program. Any directed shares not purchased will be offered
by the underwriters to the general public on the same basis as all other shares
of class A common stock offered. We have agreed to indemnify the underwriters
against certain liabilities and expenses, including liabilities under the
Securities Act, in connection with the sales of the directed shares. We and the
participants in the directed share program have agreed that, for a period of 60
days for 401(k) Plan participants, 180 days for directors, officers and
employees purchasing for their own account, and 365 days for independent agents,
in each case from the date of this prospectus, they will not, without the prior
written consent of Salomon Smith Barney Inc., dispose of or hedge any shares of
our common stock or any securities convertible into or exchangeable for our
common stock.


     Prior to this offering, there has been no public market for our class A
common stock. Consequently, the initial public offering price for the shares
will be determined by negotiations among us and the representatives. Among the
factors to be considered in determining the initial public offering price will
be our record of operations, our current financial condition, our future
prospects, our markets, the economic conditions in and future prospects for the
industry in which we compete, our management and currently prevailing general
conditions in the equity securities markets, including current market valuations
of publicly traded companies considered comparable to our company. We cannot
assure you, however, that the prices at which the shares will sell in the public
market after this offering will not be lower than the initial public offering
price or that an active trading market in our class A common stock will develop
and continue after this offering.

     We have applied to list our class A common stock on the New York Stock
Exchange under the symbol "TAP.A." The underwriters will undertake to sell
shares of class A common stock to a minimum of 2,000 beneficial owners in lots
of 100 or more shares to meet the New York Stock Exchange distribution
requirements for trading.

     The following table shows the underwriting discounts and commissions that
we are to pay to the underwriters in connection with this offering. These
amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of class A common stock.



                                                                             PAID BY
                                                                TRAVELERS PROPERTY CASUALTY CORP.
                                                                ----------------------------------
                                                                NO EXERCISE         FULL EXERCISE
                                                                ------------        --------------
                                                                              
Per share...................................................      $                    $
Total.......................................................      $                    $


     In connection with the offering, Salomon Smith Barney Inc. on behalf of the
underwriters may purchase and sell shares of class A common stock in the open
market. These transactions may include short sales, syndicate covering
transactions and stabilizing transactions. Short sales involve syndicate sales
of common stock in excess of the number of shares to be purchased by the
underwriters in the offering,

                                       I-5

                 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

which creates a syndicate short position. "Covered" short sales are sales of
shares made in an amount up to the number of shares represented by the
underwriters' over-allotment option. In determining the source of shares to
close out the covered syndicate short position, the underwriters will consider,
among other things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase shares through the
over-allotment option. Transactions to close out the covered syndicate short
involve either purchases of the common stock in the open market after the
distribution has been completed or the exercise of the over-allotment option.
The underwriters may also make "naked" short sales of shares in excess of the
over-allotment option. The underwriters must close out any naked short position
by purchasing shares of common stock in the open market. A naked short position
is more likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the shares in the open market after pricing
that could adversely affect investors who purchase in the offering. Stabilizing
transactions consist of bids for or purchases of shares in the open market while
the offering is in progress.

     The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney repurchases shares originally sold by that syndicate member
in order to cover syndicate short positions or make stabilizing purchases.

     Any of these activities may have the effect of preventing or retarding a
decline in the market price of the class A common stock. They may also cause the
price of the class A common stock to be higher than the price that would
otherwise exist in the open market in the absence of these transactions. The
underwriters may conduct these transactions on the New York Stock Exchange or in
the over-the-counter market, or otherwise. If the underwriters commence any of
these transactions, they may discontinue them at any time.

     Because Salomon Smith Barney is a member of the NYSE and because of its
relationship to us, it will not be permitted under the rules of the NYSE to
solicit the purchase or sale of our shares or make recommendations regarding the
purchase or sale of our shares. This may harm the trading market for the shares.
These restrictions will not apply after the tax-free distribution by Citigroup
to its stockholders of its entire ownership interest in us.

     We estimate that our portion of the total expenses of this offering will be
$               .

     Because an affiliate of Salomon Smith Barney Inc. beneficially owns more
than 10% of the class A common stock outstanding prior to the closing of this
offering, it may be deemed to have a "conflict of interest" with us under Rule
2720 of the National Association of Securities Dealers, Inc. When a NASD member
with a conflict of interest participates as an underwriter in a public offering,
that rule requires that the initial public offering price may be no higher than
that recommended by a "qualified independent underwriter," as defined by the
NASD. In accordance with this rule, Merrill Lynch, Pierce, Fenner & Smith
Incorporated has assumed the responsibilities of acting as a qualified
independent underwriter. In its role as a qualified independent underwriter,
Merrill Lynch has performed a due diligence investigation and participated in
the preparation of this prospectus and the registration statement of which this
prospectus is a part. Merrill Lynch will not receive any additional fees for
serving as qualified independent underwriter in connection with this offering.
We have agreed to indemnify Merrill Lynch against liabilities incurred in
connection with acting as a qualified independent underwriter, including
liabilities under the Securities Act.

     The underwriters may, from time to time, engage in transactions with and
perform services for us in the ordinary course of their business. See
"Arrangements Between our Company and Citigroup."

     A prospectus in electronic format may be made available on the websites
maintained by one or more of the underwriters. The representatives may agree to
allocate a number of shares to underwriters for sale to their online brokerage
account holders. The representatives will allocate shares to underwriters that
may make Internet distributions on the same basis as other allocations. In
addition, shares may be sold by the underwriters to securities dealers who
resell shares to online brokerage account holders.

     We and Citigroup have agreed to indemnify the underwriters against some
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriters may be required to make because of any
of those liabilities.

                                       I-6

                 [ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF
THIS PROSPECTUS.

     UNTIL                , 2002 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS THAT BUY, SELL OR TRADE OUR CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

     IN CONNECTION WITH THIS OFFERING, SALOMON SMITH BARNEY INC. MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE CLASS A
COMMON STOCK AND CONVERTIBLE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT
OTHERWISE PREVAIL FOR A LIMITED PERIOD AFTER THE ISSUE DATE. HOWEVER, THERE MAY
BE NO OBLIGATION ON SALOMON SMITH BARNEY INC. TO DO THIS. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME, AND MUST BE BROUGHT TO AN END AFTER
A LIMITED PERIOD.

                               210,000,000 SHARES

                       TRAVELERS PROPERTY CASUALTY CORP.

                                [TRAVELERS LOGO]

                              CLASS A COMMON STOCK
                                  ------------

                                   PROSPECTUS

                                     , 2002

                                  ------------
                               GLOBAL COORDINATOR
                              SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
           DEUTSCHE BANK
                      GOLDMAN SACHS INTERNATIONAL
                                 LEHMAN BROTHERS
                                          MERRILL LYNCH INTERNATIONAL
                                                 MORGAN STANLEY
                                                         UBS WARBURG


                                                    
BBVA BOLSA, S.V.                     BNP PARIBAS                              CAZENOVE
CDC IXIS CAPITAL MARKETS      CREDIT LYONNAIS SECURITIES            DRESDNER KLEINWORT
                                                                           WASSERSTEIN
MEDIOBANCA--BANCA DI          SANTANDER CENTRAL HISPANO                 WESTLB PANMURE
CREDITO FINANZIARIO S.P.A.         INVESTMENT, S.A.


--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                       I-7


     THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
     MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
     THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
     AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
     THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

     [ALTERNATE PAGE FOR CONVERTIBLE JUNIOR SUBORDINATED NOTES PROSPECTUS]

                  SUBJECT TO COMPLETION, DATED MARCH 19, 2002


PROSPECTUS
                                  $850,000,000

                       TRAVELERS PROPERTY CASUALTY CORP.

                                 TRAVELERS LOGO

                  % CONVERTIBLE JUNIOR SUBORDINATED NOTES DUE 2032
                               ------------------


     We are offering $850 million aggregate principal amount of our      %
Convertible Junior Subordinated Notes due 2032. The notes will mature on April
  , 2032. The notes will bear interest at a fixed rate of      % per year.
Interest on the notes will be payable quarterly in arrears on January   , April
  , July   , and October   of each year, commencing July   , 2002 (subject to
our right to defer interest payments as described in this prospectus). We may
redeem some or all of the notes on or after April   , 2007 under the
circumstances and at the prices described in this prospectus. If at any time
after April   , 2003 the 20-trading day average price of our common stock is at
least 20% above the conversion price (and in certain other circumstances
described in this prospectus), the notes are convertible by holders into shares
of our class A common stock at a conversion rate of          shares of class A
common stock for each $25 principal amount of notes (subject to adjustment in
certain events and subject to our right to elect a cash settlement under the
circumstances described in this prospectus).


     The notes will be unsecured obligations and will be subordinated in right
of payment to all of our senior indebtedness. The notes will be structurally
subordinated to the indebtedness and other liabilities of our subsidiaries.

     Concurrently with this offering, we are also making an initial public
offering of 210,000,000 shares of our class A common stock, plus up to an
additional 21,000,000 shares of our class A common stock if the underwriters for
that offering exercise their over-allotment option in full.


     Prior to this offering and the concurrent initial public offering of our
class A common stock, there has been no public market for the notes or our class
A common stock. We have applied to list the notes on the New York Stock Exchange
under the symbol "TPK." We have applied to list our class A common stock on the
New York Stock Exchange under the symbol "TAP.A."

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


     INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
11.


     Neither the Securities and Exchange Commission nor any state securities or
insurance commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
                               ------------------



                                                              PER NOTE    TOTAL
                                                              --------    -----
                                                                    
Public Offering Price(1)....................................    $         $
Underwriting Discount.......................................    $         $
Proceeds to Travelers Property Casualty Corp. (before
  expenses).................................................    $         $


---------------
(1) Plus accrued interest, if any, from                , 2002.

     We have also granted the underwriters an option to purchase up to an
additional $42.5 million aggregate principal amount of notes to cover
over-allotments.

     The underwriters expect to deliver the notes in book-entry form only
through the facilities of The Depository Trust Company against payment in New
York, New York, on                , 2002.
                               ------------------

                              SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
           GOLDMAN, SACHS & CO.
                      MERRILL LYNCH & CO.
                                RAMIREZ & CO., INC.
                                         UTENDAHL CAPITAL PARTNERS, L.P.

          , 2002

                                       A-i


     [ALTERNATE PAGE FOR CONVERTIBLE JUNIOR SUBORDINATED NOTES PROSPECTUS]

                                  THE OFFERING

     The following is a brief summary of certain terms of this offering. For a
more complete description of the terms of the notes, see "Description of the
Notes."

Issuer........................   Travelers Property Casualty Corp.

Securities Offered............   $850 million aggregate principal amount of
                                      % Convertible Junior Subordinated Notes
                                 due 2032. We have also granted the underwriters
                                 an over-allotment option to purchase $42.5
                                 million aggregate principal amount of
                                 additional notes.

Maturity......................   April   , 2032, unless earlier redeemed,
                                 repurchased or converted.

Interest......................        % per year payable quarterly in arrears on
                                 January   , April   , July   , and October   of
                                 each year, commencing on July   , 2002.

Interest Payment Deferral.....   We will have the right to defer interest
                                 payments on the notes for an extension period
                                 not exceeding 20 consecutive interest periods
                                 during which no interest shall be due and
                                 payable. A deferral of interest payments cannot
                                 extend, however, beyond the maturity of the
                                 notes. During any extension period, except as
                                 described under "Description of the
                                 Notes -- Principal, Maturity and Interest --
                                 Deferral of Interest Payments," we will not be
                                 permitted to (1) declare or pay any dividends
                                 or make any distributions on our capital stock
                                 or redeem, purchase, acquire or make a
                                 liquidation payment on any of our capital
                                 stock, or make any guarantee payments relating
                                 to the foregoing, or (2) make an interest,
                                 principal or premium payment on, or repay,
                                 repurchase or redeem, any of our debt
                                 securities that rank equal with or junior to
                                 the notes.


Conversion....................   Subject to our right to elect a cash settlement
                                 as described below and unless previously
                                 redeemed or repurchased, the notes are
                                 convertible into shares of our class A common
                                 stock at the option of the holder at any time
                                 after April   , 2003 and prior to 5:00 p.m.,
                                 New York City time, on April   , 2032 if at any
                                 time (1) the average of the daily closing
                                 prices of our class A common stock for the 20
                                 consecutive trading days immediately prior to
                                 the conversion date is at least 20% above the
                                 conversion price on the conversion date, (2)
                                 the notes have been called for redemption, (3)
                                 specified corporate transactions described in
                                 this prospectus have occurred or (4) specified
                                 credit rating events with respect to the notes
                                 described in this prospectus have occurred. The
                                 notes will be convertible at an initial
                                 conversion rate of          shares of our class
                                 A common stock for each $25 principal amount of
                                 notes (equivalent to an initial conversion
                                 price of $     per share of class A common
                                 stock), subject to adjustment in certain
                                 events. The right to convert notes that have
                                 been called for redemption will terminate at
                                 the close of business on the business day
                                 immediately preceding the applicable redemption
                                 date. No fractional shares of class A common
                                 stock will be issued as a result of a
                                 conversion. Instead, fractional interests will
                                 be paid in cash.


                                       A-1


     [ALTERNATE PAGE FOR CONVERTIBLE JUNIOR SUBORDINATED NOTES PROSPECTUS]

                                 From April   , 2003, and until the next
                                 business day following the date of the
                                 distribution (provided that the distribution
                                 has not occurred by April   , 2003), we may
                                 elect to make a cash settlement in respect of
                                 any notes surrendered for conversion. The
                                 amount of cash that we will pay if we elect a
                                 cash settlement will be equal to the value of
                                 the underlying shares of class A common stock.

                                 See "Description of the Notes -- Conversion."

Optional Redemption...........   On or after April   , 2007, at any time or from
                                 time to time, the notes may be redeemed at our
                                 option, in whole or in part, in cash at the
                                 redemption prices set forth in this prospectus,
                                 together with any accrued and unpaid interest
                                 to, but excluding, the redemption date. See
                                 "Description of the Notes -- Optional
                                 Redemption."

Mandatory Redemption..........   None.

Ranking.......................   The notes will be our general unsecured
                                 obligations and will be subordinated in right
                                 of payment to all of our existing and future
                                 Senior Indebtedness (as defined in "Description
                                 of the Notes - Subordination") to the extent
                                 set forth in the indenture. As of the date of
                                 this prospectus, after giving effect to the
                                 offerings and the use of proceeds therefrom, we
                                 would have had $1.15 billion of senior
                                 indebtedness outstanding to which the notes
                                 would be subordinated. In addition, the notes
                                 will be effectively subordinated to all
                                 existing and future indebtedness and other
                                 liabilities of any of our current or future
                                 subsidiaries. As of the date of this
                                 prospectus, our subsidiaries had $1.78 billion
                                 of indebtedness outstanding. The indenture will
                                 not limit the amount of other indebtedness or
                                 liabilities that we or our subsidiaries may
                                 incur or securities that we or our subsidiaries
                                 may issue in the future. You should read the
                                 information under the headings "Risk
                                 Factors -- Risks Relating to the Notes -- We
                                 Are Not Required to Pay You Under the Notes
                                 Unless We First Make Other Required Payments"
                                 for more information on the subordination of
                                 the notes.

Use of Proceeds...............   We estimate that we will receive net proceeds
                                 from this offering of approximately $825
                                 million (or $866 million if the underwriters'
                                 over-allotment option is exercised in full). We
                                 expect to apply proceeds from this offering to
                                 prepay intercompany indebtedness to Citigroup.
                                 See "Use of Proceeds."


Trading.......................   We have applied to list the notes on the New
                                 York Stock Exchange under the symbol "TPK." We
                                 have applied to list our class A common stock
                                 on the New York Stock Exchange under the symbol
                                 "TAP.A."


                                       A-2


     [ALTERNATE PAGE FOR CONVERTIBLE JUNIOR SUBORDINATED NOTES PROSPECTUS]

                              CONCURRENT OFFERING

Class A common stock
offered.......................   210,000,000 shares

Common stock to be outstanding
after the concurrent initial
public offering...............   500,000,000 shares of class A common stock
                                 500,000,000 shares of class B common stock

Common stock to be held by
Citigroup following the
concurrent initial public
offering......................   290,000,000 shares of class A common stock
                                 500,000,000 shares of class B common stock

Use of proceeds...............   We will use the net proceeds from the
                                 concurrent initial public offering to prepay
                                 intercompany indebtedness to Citigroup.

Dividend policy...............   We intend to pay quarterly cash dividends on
                                 all classes of our common stock at an initial
                                 rate of $0.06 per share of common stock,
                                 commencing in the first quarter of 2003,
                                 subject to financial results and declaration by
                                 our board of directors. See "Dividend Policy"
                                 for a discussion of the factors that will
                                 affect the determination by our board of
                                 directors to declare dividends, as well as
                                 other matters concerning our dividend policy.

Voting rights

  Class A common stock........   One vote per share

  Class B common stock........   Seven votes per share

New York Stock Exchange
symbol........................   We have applied to list our class A common
                                 stock on the New York Stock Exchange under the
                                 symbol "TAP.A."

                                       A-3

     [ALTERNATE PAGE FOR CONVERTIBLE JUNIOR SUBORDINATED NOTES PROSPECTUS]

                          RISKS RELATING TO THE NOTES

WE ARE NOT REQUIRED TO PAY YOU UNDER THE NOTES UNLESS WE FIRST MAKE OTHER
REQUIRED PAYMENTS.

     Our obligations under the notes will rank junior to all of our existing and
future senior indebtedness. This means that we cannot make any payments on the
notes if we default on a payment of senior indebtedness and do not cure the
default within the applicable grace period or if the senior indebtedness becomes
immediately due because of a default and has not yet been paid in full. In the
event of our bankruptcy, liquidation or reorganization or upon acceleration of
the notes due to an event of default under the indenture pursuant to which the
notes are issued and in certain other events, our assets will be available to
pay obligations on the notes only after all of our senior indebtedness has been
paid, and there may not be sufficient assets remaining to pay amounts due on any
or all of the notes then outstanding. In addition, our obligations under the
notes will be effectively subordinated to all existing and future indebtedness
and other liabilities of any of our current or future subsidiaries.

     The incurrence of additional indebtedness by us or our subsidiaries could
adversely affect our ability to pay our obligations on the notes. The indenture
pursuant to which the notes will be issued will not limit our ability or that of
our subsidiaries to incur additional indebtedness, including indebtedness that
ranks senior in priority of payment to the notes.

DEFERRAL OF INTEREST PAYMENTS WOULD HAVE ADVERSE TAX CONSEQUENCES FOR YOU AND
MAY ADVERSELY AFFECT THE TRADING PRICE OF THE NOTES.

     If interest payments on the notes are deferred, you will be required to
recognize interest income for United States federal income tax purposes in
respect of interest payments on the notes held by you before you receive any
cash distributions relating to this interest. In addition, you will not receive
this cash if you sell the notes before the end of any deferral period or before
the record date relating to interest payments which are to be paid.

     We have no current intention of deferring interest payments on the notes
and believe that such deferral is a remote possibility. However, if we exercise
our right in the future, the notes may trade at a price that does not fully
reflect the value of accrued but unpaid interest on the notes. If you sell the
notes during an interest deferral period, you may not receive the same return on
investment as someone else who continues to hold the notes. In addition, the
existence of our right to defer payments of interest on the notes may mean that
the market price for the notes may be more volatile than other securities that
do not have these rights.

YOU SHOULD NOT RELY ON THE INTEREST PAYMENTS ON THE NOTES THROUGH THEIR MATURITY
DATE -- THEY MAY BE REDEEMED AT OUR OPTION.

     The notes may be redeemed at our option, at any time or from time to time,
in whole or in part, on or after April   , 2007, in cash at the redemption
prices set forth in this prospectus, together with any accrued and unpaid
interest to, but excluding, the redemption date. You should assume that this
redemption option will be exercised if we are able to refinance at a lower
interest rate or it is otherwise in our interest to redeem the notes.

THE MARKET PRICES FOR THE NOTES AND OUR CLASS A COMMON STOCK MAY BE VOLATILE.

     The initial public offering price of our class A common stock will be
determined by negotiations between us and the representatives of the
underwriters and may not be indicative of the market price of our class A common
stock after the initial public offering or the price at which our class A common
stock may be sold in the public market after the offering. Factors such as
quarterly variations in our financial results, announcements by us or others,
developments affecting us and general market volatility could cause the market
price of our class A common stock to fluctuate significantly. These market
fluctuations

                                       A-4

     [ALTERNATE PAGE FOR CONVERTIBLE JUNIOR SUBORDINATED NOTES PROSPECTUS]

may harm the market price of the notes and our class A common stock into which
the notes are convertible. Accordingly, the notes that an investor may purchase,
whether pursuant to the offer made by this prospectus or in the secondary
market, may trade at a discount to the price that the investor paid to purchase
the notes.

AN ACTIVE TRADING MARKET FOR THE NOTES MAY NOT DEVELOP.

     Although we will use our best efforts to list the notes on the New York
Stock Exchange, we cannot assure you that the notes will be approved for listing
or that a trading market will exist for the notes. If an active market for the
notes fails to develop or to be sustained, the price and liquidity of the notes
could be reduced. Future trading prices of the notes will depend on many
factors, including, among other things, trading prices of our class A common
stock, prevailing interest rates, the market for similar securities, our
performance and other factors.

                                       A-5

     [ALTERNATE PAGE FOR CONVERTIBLE JUNIOR SUBORDINATED NOTES PROSPECTUS]

                            DESCRIPTION OF THE NOTES

     Set forth below is a description of the notes. The following description is
not intended to be complete and is qualified by the indenture to be entered into
between us and The Bank of New York, as the trustee, as supplemented by the
first supplemental indenture, to be entered into between us and the trustee,
forms of which are filed as exhibits to the registration statement of which this
prospectus forms a part and pursuant to the Trust Indenture Act. Several
capitalized terms used herein are defined in the indenture. Wherever particular
defined terms of the indenture are referred to, such defined terms are
incorporated herein by reference as part of the statement made, and the
statement is qualified in its entirety by such reference.

GENERAL

     The notes will be unsecured debt under the indenture. Our obligations under
the notes will rank junior to all of our existing and future Senior Indebtedness
(as defined below). As of December 31, 2001, we had $1.2 billion of Senior
Indebtedness outstanding to which the notes would be subordinated. In addition,
our obligations under the notes will be effectively subordinated to all existing
and future indebtedness and other liabilities of any of our current or future
subsidiaries. As of December 31, 2001, our subsidiaries had $1.78 billion of
indebtedness outstanding. The indenture pursuant to which the notes are issued
does not limit our ability or that of our subsidiaries to incur additional
indebtedness, including indebtedness that ranks senior in priority of payment to
the notes.

PRINCIPAL, MATURITY AND INTEREST

     The notes will be limited in aggregate principal amount to $892.5 million.
The notes will bear interest from March   , 2002 at   % per year and will mature
on April   , 2032.

     The notes will initially be issued in the form of one or more global
securities (as described below). As described in this prospectus, under limited
circumstances, the notes may be issued in certificated form in exchange for a
global security. In the event that notes are issued in certificated form, such
notes will be in denominations of $25 and integral multiples thereof and may be
transferred or exchanged at the offices described below. Payments on the notes
issued as a global security will be made to DTC, to a successor depositary or,
in the event that no depositary is used, to a paying agent for the notes. In the
event notes are issued in certificated form, principal and interest will be
payable, the transfer of the notes will be registrable and the notes will be
exchangeable for notes of other denominations of a like aggregate principal
amount at the corporate trust office of the indenture trustee in New York, New
York. Payment of interest may be made at our option by check mailed to the
address of the persons entitled thereto. See "-- Book-Entry
Notes -- Distributions on Book-Entry Notes."

     We will pay interest on the notes quarterly in arrears on January   , April
  , July   and October   of each year, commencing July   , 2002, to holders of
record at the close of business on                ,                ,
               or                immediately preceding the interest payment
dates. Each date on which interest is paid is called an "interest payment date."
In the event the notes shall not continue to remain in book-entry only form, we
will have the right to select record dates, which shall be more than 14 days but
less than 60 days prior to the interest payment date.

     The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full period will be computed on the basis of the
actual number of days elapsed per 30-day month. In the event that any date on
which interest is payable on the notes is not a business day, then payment of
the interest payable on such date will be made on the next succeeding day that
is a business day, and without any interest or other payment in respect of any
such delay. However, if such business day is in the next succeeding calendar
year, then such payment shall be made on the immediately preceding business day,
in each case with the same force and effect as if made on such date.

                                       A-6

     [ALTERNATE PAGE FOR CONVERTIBLE JUNIOR SUBORDINATED NOTES PROSPECTUS]

  DEFERRAL OF INTEREST PAYMENTS

     We will have the right under the indenture to defer interest payments on
the notes for an extension period not exceeding 20 consecutive interest periods
during which no interest shall be due and payable. A deferral of interest
payments cannot extend, however, beyond the maturity of the notes. As a
consequence of our extension of an interest payment period, payments of interest
on the notes would be deferred during any such extended interest payment period.
During an extension period, the amount of interest payments due to you would
continue to accumulate and such deferred interest payments will themselves
accrue interest. In the event that we exercise our right to extend an interest
payment period, then:

          (1) we will not declare or pay any dividend on, make any distributions
     relating to, or redeem, purchase, acquire or make a liquidation payment
     relating to, any of our capital stock or make any guarantee payment
     relating thereto other than

             - repurchases, redemptions or other acquisitions of shares of our
        capital stock in connection with any employment contract, benefit plan
        or other similar arrangement with or for the benefit of employees,
        officers, directors or consultants;

             - as a result of an exchange or conversion of any class or series
        of our capital stock for any other class or series of our capital stock;
        or

             - the purchase of fractional interests in shares of our capital
        stock pursuant to the conversion or exchange provisions of such capital
        stock or the security being converted or exchanged; and

          (2) we may not make any payment of interest on or principal of, or
     premium, if any, on, or repay, repurchase or redeem, any debt securities
     issued by us which rank equally with or junior to the notes.

The foregoing, however, will not apply to any stock dividends paid by us where
the dividend stock is the same stock as that on which the dividend is being
paid. Prior to the termination of any extension period, we may further extend
the extension period, so long as that extension period, together with all such
previous and further extensions of the period, may not exceed 20 consecutive
interest periods. An extension period cannot extend, however, beyond the
maturity of the notes.

     Upon the termination of any extension period and the payment of all amounts
then due, we may commence a new extension period which must comply with the
above requirements. The trustee will give the holders of the notes notice of any
extension period upon their receipt of notice thereof from us. If payments of
interest are deferred, the deferred interest payments and accrued interest on
such interest payments will be paid to holders of record of the notes as they
appear on our books and records on the record date next following the
termination of such deferral period.

OPTIONAL REDEMPTION

     We will have the right to redeem the notes, in whole or in part, at any
time or from time to time, on or after April   , 2007, upon not less than 30 nor
more than 60 days' notice. The redemption price will be as set forth below
(expressed as a percentage of the principal amount of the notes being redeemed),
together with any accrued and unpaid interest to, but excluding, the redemption
date:



YEAR                                                          REDEMPTION PRICE
----                                                          ----------------
                                                           
2007........................................................
2008........................................................
2009........................................................
2010........................................................
2011........................................................
2012 and thereafter.........................................       100.00%


                                       A-7

     [ALTERNATE PAGE FOR CONVERTIBLE JUNIOR SUBORDINATED NOTES PROSPECTUS]

     If fewer than all of the notes are to be redeemed, the trustee will select
the notes to be redeemed by lot, or in its discretion, on a pro rata basis or by
another method the trustee considers fair and appropriate. If any note is to be
redeemed in part only, a new note in principal amount equal to the unredeemed
principal portion will be issued. If a portion of your notes is selected for
partial redemption and you convert a portion of your notes, the converted
portion will be deemed to be of the portion selected for redemption.

MANDATORY REDEMPTION

     We are not required to make mandatory redemption or sinking fund payments
with respect to the notes.

CONVERSION


     Subject to our right to elect a cash settlement as described below, and
unless we have redeemed or repurchased the notes, the notes are convertible into
shares of our class A common stock at the option of the holders of the notes at
any time after April   , 2003 and prior to 5:00 p.m., New York City time, on
April   , 2032 (or, in the case of notes called for redemption, before the close
of business on the business day immediately preceding the applicable redemption
date) if at that time the conditions described below are satisfied. The notes
will be convertible in the manner and subject to the conditions described below,
at an initial conversion rate of          shares of our class A common stock for
each $25 principal amount of notes (equivalent to an initial conversion price of
$     per share of class A common stock), subject to adjustment as described
below.



     Holders may surrender their notes for conversion into shares of our class A
common stock during the period specified above only under any one of the
following circumstances.



     Conversion Based Upon Stock Price.  A holder may surrender its notes for
conversion into shares of our class A common stock if the average of the daily
closing prices of our class A common stock for the 20 consecutive trading days
immediately prior to the conversion date is at least 20% above the conversion
price on such conversion date.



     Conversion Upon Redemption.  A holder may surrender for conversion any note
called for redemption before the close of business on the business day
immediately preceding the applicable redemption date.



     Conversion Upon Specified Corporate Transactions.  If we elect to:



        - issue to all holders of our class A common stock rights or warrants to
         subscribe for our class A common stock, in each case at less than the
         then current market price (as defined below), or



        - distribute to all holders of our class A and/or class B common stock
         evidences of indebtedness, shares of capital stock, securities, cash or
         other assets (excluding any dividend or distribution covered by the
         first or third bullet point under "-- Conversion Price
         Adjustments -- General") having a fair market value which exceeds 15%
         of our market capitalization on the record date for such distribution,



we must notify the holders of the notes at least 10 business days prior to the
ex-dividend date for such distribution. Once we have given this notice, holders
may surrender their notes for conversion until the earlier of the close of
business on the business day prior to the ex-dividend date or our announcement
that such distribution will not take place.



     In addition, if we are party to a consolidation, merger or binding share
exchange pursuant to which our class A common stock would be converted into
cash, securities or other property (other than if the property consists of
shares of voting common stock of the surviving or acquiring person that are, or
upon issuance will be, traded on a United States national securities exchange or
approved for trading on an


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established automated over-the-counter trading market in the United States, and
such shares represent at least 95% of the aggregate fair market value (as
determined by our board of directors) of the property), a holder may surrender
notes for conversion at any time from and after the date which is 15 days prior
to the anticipated effective date of the transaction until 15 days after the
actual effective date of such transaction.



     Conversion Upon Credit Ratings Event.  A holder may surrender any of its
notes for conversion, if the long-term credit ratings assigned to the notes by
Moody's Investors Service, Inc. or Standard & Poor's Ratings Group is reduced to
or below Ba1 or BB+, respectively, or if either service, or their successors, no
longer rates the notes.



     From April   , 2003, and until the next business day following the date of
the distribution (provided that the distribution has not occurred by April  ,
2003), we may elect to make a cash settlement in respect of any notes
surrendered for conversion by delivering notice to the conversion agent not more
than five trading days after the notes are surrendered for conversion. If the
distribution does not occur, our option to elect a cash settlement will
continue.


     The amount of cash that you will receive if we elect a cash settlement with
respect to any notes surrendered for conversion will be equal to the value of
the underlying shares of our class A common stock as calculated by determining
the product of (i) the then applicable conversion rate and (ii) the average of
the closing price, as defined in the indenture, of our class A common stock on
the five trading days beginning two trading days after our delivery of the
notice to the conversion agent. We will pay the cash settlement as promptly as
practicable after the completion of the five trading day period.

     Whenever shares of our class A common stock are issued upon conversion of
the notes and we have in effect at such time a shareholder rights agreement
under which holders of our class A common stock are issued rights entitling the
holders, under specific circumstances, to purchase additional shares of our
class A common stock, we will issue, together with each share of our class A
common stock, an appropriate number of rights.


     Conversions of the notes may be effected by delivering them to the office
of the conversion agent maintained for such purpose in the Borough of Manhattan,
the City of New York. The Bank of New York will serve as the conversion agent
for the notes. Upon surrender of the notes by a holder to the conversion agent,
the conversion agent will convert such notes to shares of class A common stock
on behalf of such holder. The delivery by us to the holders of the notes
(through the conversion agent) of the fixed number of shares of our class A
common stock into which the notes are convertible (together with the cash
payment, if any, in lieu of fractional shares) or, if applicable, a cash
settlement as described below, will be deemed to discharge our obligations under
the notes, including our obligation to pay the principal amount of the notes so
converted, and the accrued and unpaid interest thereon attributable to the
period from the last date to which interest has been paid or for which interest
has been duly provided.


     Except as described below, we will not make any payment or other adjustment
for accrued interest on the notes or dividends on any class A common stock
issued upon conversion of the notes. If a note is surrendered for conversion
after the close of business on any regular record date for payment of interest
and before the opening of business on the corresponding interest payment date,
then, notwithstanding such conversion, the interest payable on such interest
payment date will be paid in cash to the person in whose name the note is
registered at the close of business on such record date, and, other than a note
or a portion of a note called for redemption on a redemption date occurring
after such record date and before such interest payment date, when so
surrendered for conversion, the note must be accompanied by payment of an amount
equal to the interest payable on such interest payment date.

     No fractional shares of class A common stock will be issued as a result of
conversion. Instead, we will pay holders cash in lieu of fractional shares based
on the market price of shares of our class A common stock on the date such notes
are surrendered for conversion.

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CONVERSION PRICE ADJUSTMENTS -- GENERAL

     The initial conversion price is subject to adjustment upon certain events,
including:

     - the payment of dividends or other distributions, in each case of our
       class A common stock on our class A common stock;

     - subdivisions, splits, combinations or reclassifications of our class A
       common stock;

     - the issuance to all holders of our class A common stock of rights or
       warrants to subscribe for our class A common stock, in each case at less
       than the then current market price (as defined below);

     - the distribution to all holders of our class A common stock of evidences
       of indebtedness, shares of capital stock, securities, cash or other
       assets (excluding any dividend or distribution covered by the first or
       third bullet point above and dividends or distributions paid exclusively
       in cash);


     - distributions (other than regular quarterly dividends) consisting
       exclusively of cash to all holders of our class A and/or class B common
       stock if such distributions, combined together with (A) other all-cash
       distributions made within the preceding 12 months for which no adjustment
       has been made plus (B) the cash and the fair market value, as of the date
       of expiration of the tender or exchange offer referred to below, of the
       consideration paid in respect of any tender offer or exchange by us or
       any of our subsidiaries for our class A and/or class B common stock
       concluded within the preceding 12 months for which no adjustment has been
       made exceeds 15% of our market capitalization (such market capitalization
       being the sum of (1) the product of the current market price of our class
       A common stock multiplied by the number of shares of our class A common
       stock then outstanding and (2) the product of the current market price of
       our class B common stock multiplied by the number of shares of our class
       B common stock then outstanding) on the record date for such
       distribution; and



     - the successful completion of a tender or exchange offer made by us or any
       of our subsidiaries for our class A and/or class B common stock if the
       same involves an aggregate consideration that, together with (A) any cash
       and the fair market value of any other consideration payable in respect
       of any other tender or exchange offer by us or any of our subsidiaries
       for our class A and/or class B stock concluded within the preceding 12
       months for which no adjustment has been made plus (B) the aggregate
       amount of any all-cash distributions to all holders of our class A and/or
       class B common stock within the preceding 12 months for which no
       adjustment has been made (excluding the dividends we declared in February
       2002 in the amounts of $1 billion and $3.7 billion), exceeds 15% of our
       market capitalization on the expiration date of such tender or exchange
       offer.



     In the event we elect to make a distribution described in the first
paragraph under "-- Conversion -- Conversion Upon Specified Corporate
Transactions" above, we will be required to give notice to the holders of the
notes at least 10 business days prior to the ex-dividend date for such
distribution and, upon the giving of such notice, the notes may be surrendered
for conversion at any time until the close of business on the business day prior
to the ex-dividend date or until we announce that such distribution will not
take place.


     If any action would require adjustment of the conversion price under more
than one of the provisions described above, only one adjustment will be made and
the adjustment will be the amount of adjustment that has the highest absolute
value to the holders of the notes. No adjustment of the conversion price will be
required to be made (i) for the issuance of any shares of our class A common
stock pursuant to any present or future plan providing for the reinvestment of
dividends or interest payable on our securities and the investment of additional
optional amounts in shares of our class A common stock under any such plan, and
the issuance of any shares of our class A common stock or options or rights to
purchase such shares pursuant to any employee benefit plan or program of ours,
pursuant to any option, warrant or exercisable, exchangeable or convertible
security outstanding as of the date hereof or (ii) in any case until cumulative
adjustments amount to one percent or more of the conversion price. We reserve
the right to make such reductions in the conversion price in addition to those
required in the foregoing provisions as in our

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discretion we determine to be advisable in order that certain stock-related
distributions hereafter made by us to our shareholders will not be taxable.

     If we issue rights under our shareholder rights plan, there shall be no
adjustment to the conversion rate as a result of:

     - the issuance of the rights;

     - the distribution of separate certificates representing the rights;

     - the exercise or redemption of the rights in accordance with any rights
       agreement; or

     - the termination or invalidation of the rights.


     The "current market price" per share of our class A or class B common stock
on any day means the average of the daily closing prices of the class A or class
B common stock for the five consecutive trading days preceding the earlier of
the day preceding the day in question and the day before the "ex date" with
respect to the issuance or distribution requiring such computation, provided
that the current market price of the class B common stock will equal the current
market price of the class A common stock until the tax-free distribution. For
purposes of this paragraph, the term "ex date," when used with respect to any
issuance or distribution, means the first date on which our common stock trades
without the right to receive the issuance or distribution.


     In the case of the payment of a dividend or other distribution on our
common stock of shares of capital stock of any class or series, or similar
equity interests, of or relating to a subsidiary or other business unit, which
we refer to as a "spin-off," the conversion rate in effect immediately before
the close of business on the record date fixed for determination of shareholders
entitled to receive that distribution will be increased by multiplying:

     - the conversion rate by

     - a fraction, the numerator of which is the current market price of our
       common stock plus the fair market value, determined as described below,
       of the portion of those shares of capital stock or similar equity
       interests so distributed applicable to one share of common stock and the
       denominator of which is the current market price of our common stock.

     The adjustment to the conversion rate under the preceding paragraph will
occur at the earlier of:

     - the tenth trading day from, and including the effective date of the spin
       off and

     - the date of the securities being offered in the initial public offering
       of the spin-off, if that initial public offering is effected
       simultaneously with the spin-off.

     For purposes of this section, "initial public offering" means the first
time securities of the same class or type as the securities being distributed in
the spin-off are bona fide offered to the public for cash.

     In the event of a spin-off that is not effected simultaneously with an
initial public offering of the securities being distributed in the spin-off, the
fair market value of the securities to be distributed to holders of our common
stock means the average of the sale prices of those securities over the first 10
trading days after the effective date of the spin-off. Also, for purposes of
such a spin-off, the current market price of our common stock means the average
of the sales prices of our common stock over the first 10 trading days after the
effective date of the spin-off.

     If, however, an initial public offering of the securities being distributed
in the spin-off is to be effected simultaneously with the spin-off, the fair
market value of the securities being distributed in the spin-off means the
initial public offering price, while the current market price of our common
stock means the sale price of our common stock on the trading day on which the
initial public offering price of the securities being distributed in the
spin-off is determined.

     In addition, we may increase the conversion rate if our board of directors
deems it advisable to avoid or diminish any income tax to holders of our common
stock resulting from any dividend or distribution of

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shares (or rights to acquire shares) or from any event treated as a dividend or
distribution for income tax purposes or for any other reasons.

CONVERSION PRICE ADJUSTMENTS -- FUNDAMENTAL CHANGE

     If we are a party to any transaction or series of transactions constituting
a fundamental change (as defined below), including, without limitation, a
merger, consolidation, sale of all or substantially all of our assets or
recapitalization of our class A common stock and excluding certain of the
transactions described above under "Conversion Price Adjustments -- General,"
then appropriate provision shall be made so that the holder of any notes then
outstanding shall have the right thereafter to convert such notes:

     - if any such transaction does not constitute a common stock fundamental
       change (as defined below), (and subject to funds being legally available
       for that purpose under applicable law at the time of conversion) into the
       kind and amount of the securities, cash or other property as the holder
       of the notes would have received upon such merger, consolidation, sale or
       recapitalization had such holder converted its notes into shares of our
       class A common stock immediately before such merger, consolidation, sale
       or recapitalization, after, in the case of a fundamental change other
       than a common stock fundamental change, giving effect to any adjustment
       in the conversion price; and

     - if any such transaction constitutes a common stock fundamental change,
       into shares of common stock of the kind received by holders of our class
       A common stock as a result of such common stock fundamental change.

     "Fundamental change" means the occurrence of any transaction or event or
series of transactions or events pursuant to which all or substantially all of
our class A common stock is exchanged for, converted into, acquired for or
constitutes solely the right to receive cash, securities, property or other
assets (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise.

     In a fundamental change transaction where all or substantially all of our
class A common stock is converted into securities, cash, or property and more
than 50% of the value received by the holders of our class A common stock
(subject to certain limited exceptions) consists of listed or Nasdaq National
Market traded common stock (which we refer to as a "common stock fundamental
change"), the conversion price adjustments are designed to provide in effect
that:

     - where our class A common stock is converted partly into such common stock
       and partly into other securities, cash, or property, each note will be
       convertible solely into a number of shares of such common stock
       determined so that the initial value of such shares equals the value of
       the shares of class A common stock into which such note was convertible
       immediately before the transaction; and

     - where our class A common stock is converted solely into such common
       stock, each note will be convertible into the same number of shares of
       such common stock receivable by a holder of the number of shares of class
       A common stock into which such note was convertible immediately before
       such transaction.

     In a fundamental change transaction that does not constitute a common stock
fundamental change transaction, the conversion price adjustment is designed to
increase the securities, cash or property into which each note is convertible.

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SUBORDINATION

     The indenture will provide that the notes will be subordinated and junior
in right of payment to all of our existing and future Senior Indebtedness (as
defined below). This means that no payment of principal, including redemption
payments, premium, if any, or interest on the notes may be made if:

     - any of our Senior Indebtedness has not been paid when due and any
       applicable grace period relating to such default has ended and such
       default has not been cured or waived or ceased to exist; or

     - the maturity of any of our Senior Indebtedness has been accelerated
       because of a default.

     Upon any distribution of our assets to creditors upon any dissolution,
winding-up, liquidation or reorganization, whether voluntary or involuntary, or
in bankruptcy, insolvency, receivership or other proceedings, all principal,
premium, if any, and interest due or to become due on all of our Senior
Indebtedness must be paid in full before the holders of the notes are entitled
to receive or retain any payment. Upon satisfaction of all claims related to all
of our Senior Indebtedness then outstanding, the rights of the holders of the
notes will be subrogated to the rights of the holders of our Senior Indebtedness
to receive payments or distributions applicable to Senior Indebtedness until all
amounts owing on the notes are paid in full.

     The term "Senior Indebtedness" means, with respect to us:

          (1) the principal, premium, if any, and interest in respect of (a)
     indebtedness for money borrowed and (b) indebtedness evidenced by
     securities, notes, debentures, bonds or other similar instruments issued by
     us;

          (2) all of our capital lease obligations;

          (3) all obligations issued or assumed by us as the deferred purchase
     price of property, all of our conditional sale obligations and all of our
     obligations under any conditional sale or title retention agreement, but
     excluding trade accounts payable arising in the ordinary course of
     business;

          (4) all of our obligations, contingent or otherwise, in respect of any
     letters of credit, banker's acceptance, security purchase facilities or
     similar credit transactions;

          (5) all obligations in respect of interest rate swap, cap or other
     agreements, interest rate future or option contracts, currency swap
     agreements, currency future or option contracts and other similar
     agreements;

          (6) all obligations of the type referred to in clauses (1) through (5)
     above of other persons for the payment of which we are responsible or
     liable as obligor, guarantor or otherwise; and

          (7) all obligations of the type referred to in clauses (1) through (6)
     above of other persons secured by any lien on any property or asset of
     ours, whether or not such obligation is assumed by such obligor.

          Notwithstanding the foregoing, Senior Indebtedness does not include:

             (a) any such indebtedness that is by its terms subordinated to or
        equally with the notes; and

             (b) any indebtedness between or among us or our affiliates,
        including all other debt securities and guarantees in respect of those
        debt securities, issued to (a) any trust formed by us or a trustee of
        such trust or (b) any trust, or a trustee of such trust, partnership or
        other entity affiliated with us that is a financing vehicle of ours in
        connection with the issuance by such financing vehicle of trust
        preferred or other securities guaranteed by us pursuant to an instrument
        that ranks equally with, or junior to, the guarantee.

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     Such Senior Indebtedness shall continue to be Senior Indebtedness and be
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.

     The indenture will not limit the aggregate amount of Senior Indebtedness
that we may issue or indebtedness or other liabilities that our subsidiaries may
issue in the future.

CONSOLIDATION, MERGER AND SALE OF ASSETS

     The indenture will provide that we will not consolidate with or merge into
any other corporation or convey, transfer or lease our assets substantially as
an entirety to another corporation unless:

     - either (1) we are the continuing corporation, or (2) the successor
       entity, if other than us, expressly assumes by supplemental indenture the
       due and punctual payment of the principal of, and premium, if any, and
       interest on the notes and the performance of every other covenant of the
       indenture on our part; and

     - immediately thereafter, no event of default and no event which, after
       notice or lapse of time, or both, would become an event of default, shall
       have happened and be continuing.

     Upon any such consolidation, merger, conveyance, transfer or lease, the
successor corporation shall succeed to and be substituted for us under the
indenture. Thereafter the predecessor corporation shall be relieved of all
obligations and covenants under the indenture and the notes.

     Other than the restrictions described above, there will be no covenants or
provisions in the indenture that would afford the holders of the notes
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving us that may adversely
affect such holders.

EVENTS OF DEFAULT

     The indenture will provide that the following will be events of default
relating to the notes:

     - default in the payment of the principal of, or premium on, if any, any
       note at its maturity;

     - default for 30 days in the payment of any installment of interest on any
       note (other than pursuant to our right to defer interest payments as
       described in this prospectus);

     - default for 90 days after written notice in the performance of any other
       covenant in respect of the notes; and

     - specified events of bankruptcy, insolvency or reorganization, or court
       appointment of a receiver, liquidator or trustee of us.

The trustee may withhold notice to the holders of the notes of any default with
respect thereto, except in the payment of principal, premium or interest, if it
considers such withholding to be in the interests of such holders.

     If any event of default shall occur with respect to the notes and be
continuing, either the trustee or the holders of 25% in aggregate principal
amount of the notes will have the right to declare the principal of and the
interest on the notes, including any compound interest and additional interest,
if any, and any other amounts payable under the indenture to be immediately due
and payable. We are required to file annually with the trustee a statement by an
officer as to the fulfillment by us of our obligations under the indenture
during the preceding year. The trustee may also enforce its other rights as a
creditor relating to the notes.

     Holders of a majority in principal amount of the notes will be entitled to
control certain actions of the trustee under the indenture and to waive past
defaults regarding the notes. The trustee generally is not

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under any obligation to act at the request, order or direction of any of the
holders of the notes, unless one or more of such holders shall have offered to
the trustee reasonable security or indemnity.

     If an event of default occurs regarding the notes, the trustee may use any
sums that it collects under the indenture for its own reasonable compensation
and expenses incurred prior to paying the holders of the notes.

     Before any holder of the notes may institute action for any remedy, except
payment on such holder's notes when due, the holders of not less than 25% in
principal amount of the notes outstanding must request the trustee to take
action. Holders must also offer satisfactory security and indemnity against
liabilities incurred by the trustee for taking such action.

AMENDMENT, SUPPLEMENT AND WAIVER

     Except as provided in the next two succeeding paragraphs, the indenture or
the notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
notes), and any existing default or compliance with any provision of the
indenture or the notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding notes (including consents
obtained in connection with a tender offer or exchange offer for notes).

     Without the consent of each holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting holder):

     - reduce the principal amount of notes whose holders must consent to an
       amendment, supplement or waiver;

     - reduce the principal of or change the fixed maturity of any note;

     - reduce the rate of or change the time for payment of interest on any
       notes;

     - reduce the redemption price of the notes or change the time at which the
       notes may or must be redeemed or purchased;

     - waive a default or event of default in the payment of principal of or
       premium, if any, interest or liquidated damages, if any, on the notes
       (except a rescission of acceleration of the notes by the holders of at
       least a majority in aggregate principal amount of the notes and a waiver
       of the payment default that resulted from such acceleration);

     - make any note payable in money other than that stated in the indenture
       and the notes;

     - make any change in the provisions of the indenture relating to waivers of
       past defaults or the rights of holders of notes to receive payments of
       principal of, premium, if any, interest or liquidated damages, if any, on
       the notes;

     - except as permitted by the indenture, increase the conversion price or,
       other than as set forth in the next paragraph, modify the provisions of
       the indenture relating to conversion of the notes in a manner adverse to
       the holders thereof; or

     - make any change to the abilities of holders of notes to enforce their
       rights under the indenture or the provisions of the clauses above.

In addition, any amendment to the provisions of the indenture that relate to
subordination will require the consent of the holders of at least 75% in
aggregate principal amount of the notes then outstanding if such amendment would
adversely affect the rights of holders of the notes.

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     Notwithstanding the foregoing, without the consent of any holder of the
notes, we and the trustee may amend or supplement the indenture or the notes to:

     - cure any ambiguity, defect or inconsistency or make any other changes in
       the provisions of the indenture which we and the trustee may deem
       necessary or desirable, provided such amendment does not materially and
       adversely affect the notes;

     - provide for uncertificated notes in addition to or in place of
       certificated notes;

     - provide for the assumption of our obligations to holders of notes in the
       circumstances required under the indenture;

     - provide for conversion rights of holders of notes in certain events such
       as a consolidation, merger or sale of all or substantially all of our
       assets;

     - reduce the conversion price;

     - make any change that would provide any additional rights or benefits to
       the holders of notes or that does not adversely affect the legal rights
       under the indenture of any such holder; or

     - comply with requirements of the SEC in order to effect or maintain the
       qualification of the indenture under the Trust Indenture Act of 1939, as
       amended.

DISCHARGE AND DEFEASANCE

     We may discharge most of our obligations to holders of the notes issued
under the indenture if such notes have not been already delivered to the trustee
for cancellation and either have become due and payable or are by their terms
due and payable within one year, or are to be called for redemption within one
year. We would discharge our obligations by depositing with the trustee an
amount certified to be sufficient to pay when due the principal of and premium,
if any, and interest on all outstanding notes and to make any mandatory
scheduled interest payments thereon when due.

     Unless otherwise specified in this prospectus relating to the notes, we, at
our option:

     - will be released from any and all obligations in respect of the notes,
       which is known as "defeasance and discharge;" or

     - need not comply with certain covenants specified herein regarding the
       notes, which is known as "covenant defeasance."

If we exercise our covenant defeasance option, the failure to comply with any
defeased covenant and any event of default in the applicable resolution of the
board of directors or supplemental indenture will no longer be an event of
default under the indenture.

     To exercise either our defeasance and discharge or covenant defeasance
options, we must:

     - deposit with the trustee, in trust, money or U.S. government obligations
       in an amount sufficient to pay all the principal of and premium, if any,
       and any interest on the notes when such payments are due; and

     - deliver an opinion of counsel to the effect that the holders of the notes
       will not recognize income, gain or loss for United States federal income
       tax purposes as a result of such deposit or defeasance and discharge or
       covenant defeasance and will be required to pay United States federal
       income tax in the same manner as if such defeasance had not occurred. In
       the case of a defeasance and discharge, such opinion must be based upon a
       ruling or administrative pronouncement of the Internal Revenue Service.

     When there is a defeasance and discharge, the indenture will no longer
govern the notes, we will no longer be liable for payment and the holders of
such notes will be entitled only to the deposited funds.

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When there is a covenant defeasance, however, we will continue to be obligated
for payments when due if the deposited funds are not sufficient to pay the
holders.

     The obligations under the indenture to register or exchange the notes, to
replace mutilated, defaced, destroyed, lost or stolen notes, and to maintain
paying agents and hold monies for payment in trust will continue even if we
exercise our defeasance and discharge or covenant defeasance options.

NOTICES

     Notices to holders of the notes will be made by first class mail, postage
prepaid, to the addresses that appear on the register of Travelers Property
Casualty Corp. The notices will be deemed to have been given on the date of the
mailing or on the date of the first publication, as the case may be.

GOVERNING LAW

     The indenture and the notes for all purposes shall be governed by and
construed in accordance with the laws of the State of New York.

BOOK-ENTRY NOTES

  BOOK-ENTRY NOTES

     Except under the limited circumstances described below, all notes will be
book-entry notes. This means that the actual purchasers of the notes will not be
entitled to have the notes registered in their names and will not be entitled to
receive physical delivery of the notes in definitive (paper) form. Instead, upon
issuance, all the notes will be represented by one or more fully registered
global notes.

     Each global note will be deposited with The Depository Trust Company, a
securities depositary, and will be registered in the name of DTC's nominee, Cede
& Co. No global note representing book-entry notes may be transferred except as
a whole by DTC to a nominee of DTC, or by a nominee of DTC to another nominee of
DTC. Thus, DTC will be the only registered holder of the notes and will be
considered the sole representative of the beneficial owners of the notes for
purposes of the indenture.

     The registration of the global securities in the name of Cede & Co. will
not affect beneficial ownership and is performed merely to facilitate subsequent
transfers. The book-entry system, which is also the system through which most
publicly traded common stock is held in the United States, is used because it
eliminates the need for physical movement of securities certificates. The laws
of some jurisdictions, however, may require some purchasers to take physical
delivery of their notes in definitive form. These laws may impair the ability of
holders to transfer book-entry notes.

     Purchasers of the notes in the United States may hold interests in the
global notes only through DTC if they are participants in the DTC system.
Purchasers may also hold interests indirectly through a securities
intermediary -- banks, brokerage houses and other institutions that maintain
securities accounts for customers -- that has an account with DTC or its
nominee. DTC will maintain accounts showing the note holdings of participants,
and these participants will in turn maintain accounts showing the note holdings
of their customers. Some of these customers may themselves be securities
intermediaries holding notes for their customers. Thus, each beneficial owner of
a book-entry note will hold that note through a hierarchy of intermediaries,
with DTC at the "top" and the beneficial owner's own securities intermediary at
the "bottom."

     In this prospectus, unless and until definitive (paper) notes are issued to
the beneficial owners as described below, all references to "holders" of notes
shall mean DTC. We, the trustee and any paying agent, transfer agent or
registrar may treat DTC as the absolute owner of the notes for all purposes.

     We will make all distributions of principal and interest on the notes to
DTC. We will send all required reports and notices solely to DTC as long as DTC
is the registered holder of the notes. DTC and its participants are generally
required by law to receive and transmit all distributions, notices and
directions from us and the trustee to the beneficial owners through a chain of
intermediaries. Purchasers of the notes

                                       A-17

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will not receive written confirmation from DTC of their purchases. However,
beneficial owners of book-entry notes are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the participants or indirect participants
through which they entered into the transaction.

     Similarly, we and the trustee will accept notices and directions solely
from DTC. Therefore, in order to exercise any rights of a holder of notes under
the indenture, each person owning a beneficial interest in the notes must rely
on the procedures of DTC. If the beneficial owner is not a participant in DTC,
then it must rely on the procedures of the participant through which that person
owns its interest. DTC will take actions under the indenture only at the
direction of its participants, which in turn will act only at the direction of
the beneficial owners. Some of these actions, however, may conflict with actions
DTC takes at the direction of other participants and beneficial owners.

     Notices and other communications by DTC to participants, by participants to
indirect participants, and by participants and indirect participants to
beneficial owners will be governed by arrangements among them.

     Book-entry notes may be more difficult to pledge because of the lack of a
physical certificate. Beneficial owners may experience delays in receiving
distributions on their notes since distributions will initially be made to DTC
and must then be transferred through the chain of intermediaries to the
beneficial owner's account.

 DISTRIBUTIONS ON BOOK-ENTRY NOTES

     We will make all distributions of principal and interest on book-entry
notes to DTC. Upon receipt of any payment of principal or interest, DTC will
credit the accounts of its participants on its book-entry registration and
transfer system. DTC will credit those accounts in proportion to the
participants' respective beneficial interests in the principal amount of the
global note as shown on the records of DTC. Payments by participants to
beneficial owners of book-entry notes will be governed by standing instructions
and customary practices, as is now the case with securities held for the account
of customers in bearer form or registered in "street-name," and will be the
responsibility of the participants.

DEFINITIVE NOTES AND PAYING AGENTS

     A beneficial owner of book-entry securities represented by a global
security may exchange the securities for definitive (paper) notes only if:

     - DTC is unwilling or unable to continue as depositary for such global
       security and we are unable to find a qualified replacement for DTC within
       90 days;

     - at any time DTC ceases to be a clearing agency registered under the
       Securities Exchange Act of 1934; or

     - we in our sole discretion decide to allow some or all book-entry
       securities to be exchangeable for definitive notes in registered form.

     If any of the events described above occurs, then the beneficial owners
will be notified through the chain of intermediaries that definitive notes are
available and notice will be published as described below under "-- Notices."
Beneficial owners of book-entry notes will then be entitled (1) to receive
physical delivery in certificated form of definitive notes equal in principal
amount to their beneficial interest and (2) to have the definitive notes
registered in their names. The definitive notes will be issued in denominations
of $25 and whole multiples of $25 in excess of that amount. Definitive notes
will be registered in the name or names of the person or persons DTC specifies
in a written instruction to the registrar of the notes. DTC may base its written
instruction upon directions it receives from its participants. Thereafter, the
registered holders of the definitive notes appearing in the register of note
holders maintained by the registrar will be recognized as the "holders" of the
notes under the indenture.

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     The indenture will provide for the replacement of a mutilated, lost, stolen
or destroyed definitive note, so long as the applicant furnishes to Travelers
Property Casualty Corp. and the trustee such security or indemnity and such
evidence of ownership as they may require.

     In the event definitive notes are issued, the holders of definitive notes
will be able to receive payment of principal and interest on their notes at the
office of Travelers Property Casualty Corp.'s paying agent maintained in the
Borough of Manhattan. Payment of principal of a definitive note may be made only
against surrender of the note to Travelers Property Casualty Corp.'s paying
agent. Travelers Property Casualty Corp. has the option, however, of making
payments of interest by mailing checks to the address of the holder appearing in
the register of note holders maintained by the registrar.

     Travelers Property Casualty Corp.'s paying agent in the Borough of
Manhattan and registrar for the notes is currently The Bank of New York, located
in the Borough of Manhattan.

     In the event that definitive notes are issued, the holders of the
definitive notes will be able to transfer their notes, in whole or in part, by
surrendering the notes for registration of transfer at the offices of The Bank
of New York. A form of such instrument of transfer will be obtainable at the
office of The Bank of New York. Upon surrender, Travelers Property Casualty
Corp. will execute, and the trustee will authenticate and deliver, new notes to
the designated transferee in the amount being transferred, and a new note for
any amount not being transferred will be issued to the transferor. Travelers
Property Casualty Corp. will not charge any fee for the registration of transfer
or exchange, except that Travelers Property Casualty Corp. may require the
payment of a sum sufficient to cover any applicable tax or other governmental
charge payable in connection with the transfer.

THE DEPOSITORY TRUST COMPANY

     DTC is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New York
banking law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered under section 17A of the Securities Exchange Act of 1934. The
rules applicable to DTC and its participants are on file with the SEC.

     We and the trustee will not have any responsibility or liability for any
aspect of the records relating to, or payments made on account of, beneficial
ownership interest in the book-entry securities or for maintaining, supervising
or reviewing any records relating to the beneficial ownership interests.

     DTC may discontinue providing its services as securities depositary with
respect to the notes at any time by giving reasonable notice to us. Under such
circumstances, in the event that a successor securities depositary is not
obtained, notes certificates are required to be printed and delivered.
Additionally, the trustee, with our consent, may decide to discontinue use of
the system of book-entry transfers through DTC or any successor depositary with
respect to the notes. In that event, certificates for the notes will be printed
and delivered.

     The information in this section concerning DTC has been provided by DTC for
informational purposes only. Neither we nor the trustee takes responsibility for
the accuracy of this information, and this information is not intended to serve
as a representation, warranty or contract modification of any kind.

                                       A-19

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             CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

     The following is a discussion of certain of the material U.S. federal
income tax consequences of the purchase, ownership and disposition of the notes
and shares of our class A common stock acquired upon conversion of the notes to
holders that purchase the notes upon original issuance at the public offering
price. This discussion assumes that the notes and shares of our class A common
stock are held as capital assets. This discussion is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations (including
proposed Treasury regulations) issued thereunder, Internal Revenue Service
("IRS") rulings and pronouncements and judicial decisions now in effect, all of
which are subject to change or differing interpretation, possibly with
retroactive effect.

     This discussion does not address all aspects of U.S. federal income
taxation that may be relevant to holders in light of their particular
circumstances, such as holders that are subject to special tax treatment (for
example, (1) banks, regulated investment companies, insurance companies, dealers
in securities or currencies, entities that are treated as partnerships for U.S.
federal income tax purposes, or tax-exempt organizations, (2) persons holding
notes or shares of class A common stock as part of a straddle, hedge, conversion
transaction or other integrated investment, or (3) U.S. holders (as defined
below) whose functional currency is not the U.S. dollar), nor does it address
alternative minimum taxes or state, local or foreign taxes.

     Prospective investors are urged to consult their tax advisors with respect
to the U.S. federal income tax consequences of the purchase, ownership and
disposition of notes and shares of class A common stock in light of their own
particular circumstances, as well as the effect of any state, local or foreign
tax laws.

CONSEQUENCES TO U.S. HOLDERS

     The following discussion is addressed to "U.S. holders" of notes and class
A common stock acquired upon conversion of the notes. For purposes of this
discussion, "U.S. holder" means (i) a person who is a citizen or resident of the
U.S., (ii) a corporation or other entity treated as a corporation for U.S.
federal income tax purposes, in each case, that is created or organized under
the laws of the United States or any political subdivision thereof, (iii) an
estate the income of which is subject to U.S. federal income taxation regardless
of its source, or (iv) a trust if a court within the U.S. is able to exercise
primary supervision over the administration of such trust and one or more U.S.
persons have the authority to control all substantial decisions of the trust.

  INTEREST AND ORIGINAL ISSUE DISCOUNT

     Under applicable Treasury regulations, a "remote" contingency that stated
interest will not be timely paid will be ignored in determining whether a debt
instrument is issued with original issue discount ("OID"). We believe that the
likelihood of exercising our option to defer payments is remote within the
meaning of the Treasury regulations. Based on the foregoing, we believe that,
although the matter is not free from doubt, the notes will not be considered to
be issued with OID at the time of their original issuance. Accordingly, stated
interest on the notes will generally be included in the gross income of a U.S.
holder as ordinary interest income at the time accrued or received, in
accordance with such U.S. holder's method of accounting for U.S. federal income
tax purposes.

     Under the Treasury regulations, if our option to defer any payment of
interest was determined not to be "remote," or if we exercised such option, the
notes would be treated as issued with OID at the time of issuance or at the time
of such exercise, as the case may be. Then, all stated interest on the notes
would thereafter be treated as OID as long as the notes remained outstanding. In
such event, all of a U.S. holder's taxable interest income relating to the notes
would constitute OID that would have to be included in income on an economic
accrual basis before the receipt of the cash attributable to the interest,
regardless of such U.S. holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
Consequently, a U.S. holder of notes would be required to include in gross
income OID even though we would not make any actual cash payments during an
extension period.

                                       A-20

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     No rulings or other interpretations have been issued by the IRS which have
addressed the meaning of the term "remote" as used in the regulations, and it is
possible that the IRS could take a position contrary to the interpretation in
this prospectus.

  DISPOSITION OF NOTES

     A U.S. holder will recognize capital gain or loss on the sale, exchange or
other taxable disposition (collectively, a "disposition") of notes (including a
redemption for cash) in an amount equal to the difference between the amount
realized by such U.S. holder on such disposition (except to the extent such
amount is attributable to accrued interest not previously included in income,
which will be taxable as ordinary income) and such U.S. holder's adjusted tax
basis in such notes. Long-term capital gains of individuals are eligible for
reduced rates of taxation. The deductibility of capital losses recognized by
U.S. holders is subject to limitations.

  CONVERSION OF NOTES

     A U.S. holder generally will not recognize gain or loss on the conversion
of notes for our class A common stock, except with respect to any cash paid to a
U.S. holder in lieu of a fractional share of our class A common stock, which
should be treated as paid in exchange for such fractional share. A U.S. holder's
aggregate tax basis in the class A common stock received on the conversion of
notes will be the same as the U.S. holder's adjusted tax basis in the notes at
the time of conversion, less the portion of such adjusted tax basis allocable to
any fractional shares. The holding period for our class A common stock received
upon conversion will generally include the holding period of the notes that were
converted.

     If we elect to make a cash settlement in respect of any notes surrendered
for conversion, such cash settlement would, for U.S. federal income tax
purposes, constitute a taxable disposition of the surrendered notes, and a U.S.
holder would recognize gain or loss as if it had disposed of such notes for
cash. See "-- Disposition of Notes."

  DIVIDENDS AND CONSTRUCTIVE DISTRIBUTIONS

     Any distribution on our class A common stock paid by us out of our current
or accumulated earnings and profits (as determined for U.S. federal income tax
purposes) will constitute a dividend and will be includible in income by a U.S.
holder when received. Any such dividend will be eligible for the dividends
received deduction if the U.S. holder is an otherwise qualifying corporate
holder that meets the holding period and other requirements for the dividends
received deduction.

     A U.S. holder of notes might be treated as receiving a constructive
dividend distribution from us if (1) the conversion price is adjusted and as a
result of such adjustment such U.S. holder's proportionate interest in our
assets or earnings and profits is increased and (2) the adjustment is not made
pursuant to a bona fide, reasonable anti-dilution formula. An adjustment in the
conversion price would not be considered made pursuant to such a formula if the
adjustment were made to compensate a U.S. holder for certain taxable
distributions with respect to our common stock. Thus, under certain
circumstances, an increase in the conversion price might give rise to a taxable
dividend to a U.S. holder of notes even though such U.S. holder would not
receive any cash related thereto.

  DISPOSITION OF CLASS A COMMON STOCK

     Upon a disposition of our class A common stock, a U.S. holder will
recognize capital gain or loss in an amount equal to the difference between the
amount realized by such U.S. holder on such disposition and such U.S. holder's
adjusted tax basis in our class A common stock (see "-- Conversion of the
Notes"). Long-term capital gains of individuals are eligible for reduced rates
of taxation. The deductibility of capital losses recognized by U.S. holders is
subject to limitations.

                                       A-21

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CONSEQUENCES TO NON-U.S. HOLDERS

     The following discussion is addressed to non-U.S. holders of notes and
class A common stock acquired upon conversion of notes. For purposes of this
discussion, a "non-U.S. Holder" is a holder of notes or class A common stock
acquired upon conversion of notes that is not a U.S. holder as defined under
"-- Consequences to U.S. Holders."

  UNITED STATES FEDERAL WITHHOLDING TAX

     United States federal withholding tax will not apply to any payment of
principal or interest (including OID) on the notes provided that:

     - the non-U.S. holder (a) does not actually (or constructively) own 10% or
       more of the total combined voting power of all classes of our voting
       stock within the meaning of the Code and the Treasury regulations and (b)
       is not a controlled foreign corporation related to us directly or
       constructively through stock ownership; and

     - (a) the non-U.S. holder provides its name, address and certain other
       information on an appropriate IRS form (or substitute form), and
       certifies, under penalties of perjury, that it is not a United States
       person or (b) the non-U.S. holder holds its notes through certain foreign
       intermediaries or certain foreign partnerships and certain certification
       requirements are satisfied.

     A non-U.S. holder will generally be subject to U.S. federal withholding tax
at a 30% rate on distributions by us with respect to our class A common stock
that are treated as dividends for U.S. federal income tax purposes and on
constructive dividends deemed paid on the notes as described above under
"--Dividends and Constructive Distributions." If a tax treaty applies, a
non-U.S. holder may be eligible for a reduced rate of withholding. Similarly,
actual or constructive dividends that are effectively connected with the conduct
of a trade or business by a non-U.S. holder within the U.S. (or, if certain tax
treaties apply, attributable to a U.S. permanent establishment maintained by the
non-U.S. holder) are not subject to the withholding tax, but instead are subject
to U.S. federal income tax, as described below. In order to claim any such
exemption or reduction in the 30% withholding tax, a non-U.S. holder should
provide an appropriate properly executed IRS form (or suitable substitute form)
claiming (a) a reduction of or an exemption from withholding under an applicable
tax treaty or (b) that such payments are not subject to withholding tax because
they are effectively connected with the non-U.S. holder's conduct of a trade or
business in the U.S.

     In general, U.S. federal withholding tax will not apply to any gain or
income realized by a non-U.S. holder on the disposition of notes or class A
common stock acquired upon conversion of notes.

  UNITED STATES FEDERAL INCOME TAX

     If a non-U.S. holder is engaged in a trade or business in the U.S. (or, if
certain tax treaties apply, if the non-U.S. holder maintains a permanent
establishment within the U.S.) and interest (including OID) on the notes and
actual or constructive dividends are effectively connected with the conduct of
that trade or business (or, if certain tax treaties apply, attributable to that
permanent establishment), such non-U.S. holder will be subject to U.S. federal
income tax (but not withholding tax), on the interest, OID and dividends on a
net income basis in the same manner as if such non-U.S. holder were a U.S.
holder. In addition, a non-U.S. holder that is a foreign corporation may be
subject to a 30% (or, if certain tax treaties apply, such lower rate as
provided) branch profits tax.

     Any gain or income realized on the disposition of notes or class A common
stock acquired upon conversion of notes generally will not be subject to U.S.
federal income tax unless:

     - that gain or income is effectively connected with the non-U.S. holder's
       conduct of a trade or business in the U.S. (or, if certain tax treaties
       apply, is attributable to a U.S. permanent establishment maintained by
       the non-U.S. holder); or

                                       A-22

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     - the non-U.S. holder is an individual who is present in the U.S. for 183
       days or more in the taxable year of the disposition and certain other
       conditions are met.

BACKUP WITHHOLDING TAX AND INFORMATION REPORTING

  U.S. HOLDERS

     Unless a U.S. holder is an exempt recipient, such as a corporation,
payments under the notes or class A common stock, proceeds received with respect
to a fractional share of class A common stock upon the conversion of notes, and
proceeds received from the disposition of notes or class A common stock, may be
subject to information reporting and may also be subject to U.S. federal backup
withholding tax if such U.S. holder fails to supply accurate taxpayer
identification numbers or otherwise fails to comply with applicable U.S.
information reporting or certification requirements. Any amounts withheld under
the backup withholding rules will be allowed as a credit against the U.S.
holder's U.S. federal income tax liability provided the required information is
furnished to the IRS.

  NON-U.S. HOLDERS

     In general, backup withholding and information reporting will not apply to
payments of interest on the notes or dividends on the class A common stock made
by us or our paying agents, in their capacities as such, to a non-U.S. holder,
or to proceeds from the disposition of notes or class A common stock, in each
case, if the holder has provided the required certification that it is a
non-U.S. holder and neither we nor our paying agent has actual knowledge that
the holder is a U.S. holder.

                                       A-23

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                                  UNDERWRITING

     Salomon Smith Barney Inc., Credit Suisse First Boston Corporation, Goldman,
Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Samuel A.
Ramirez & Company, Inc. and Utendahl Capital Partners, L.P. are acting as
representatives of the underwriters named below. Subject to the terms and
conditions stated in the underwriting agreement dated the date of this
prospectus, each underwriter named below has agreed to purchase, and we have
agreed to sell to that underwriter, the principal amount of notes set forth
opposite the underwriter's name.



                                                              PRINCIPAL AMOUNT
                                                                  OF NOTES
UNDERWRITER                                                   ----------------
-----------
                                                           
Salomon Smith Barney Inc. ..................................
Credit Suisse First Boston Corporation......................
Goldman, Sachs & Co. .......................................
Merrill Lynch, Pierce, Fenner & Smith
             Incorporated...................................
Samuel A. Ramirez & Company, Inc. ..........................
Utendahl Capital Partners, L.P. ............................
                                                                ------------
             Total..........................................    $850,000,000
                                                                ============


     The underwriting agreement provides that the obligations of the
underwriters to purchase the notes included in this offering are subject to
approval of legal matters by counsel and to other conditions. The underwriters
are obligated to purchase all the notes (other than those covered by the
over-allotment option described below) if they purchase any of the notes.

     The underwriters propose to offer some of the notes directly to the public
at the public offering price set forth on the cover page of this prospectus and
some of the notes to dealers at the public offering price less a concession not
to exceed $     per note. The underwriters may allow, and the dealers may
reallow, a concession not to exceed $     per note on sales to other dealers. If
all of the notes are not sold at the initial offering price, the representatives
may change the public offering price and the other selling terms. The
representatives have advised us that the underwriters do not intend to confirm
any sales to any accounts over which they exercise discretionary authority.


     We have granted to the underwriters an option, exercisable for 30 days from
and including the date of the closing of this offering, to purchase up to $42.5
million aggregate principal amount of additional notes at the public offering
price less the underwriting discount. The underwriters may exercise the option
solely for the purpose of covering over-allotments, if any, in connection with
this offering. To the extent the option is exercised, each underwriter must
purchase a principal amount of additional notes approximately proportionate to
that underwriter's initial purchase commitment.


     We, our officers and directors, and Citigroup have agreed that, for a
period of 180 days from the date of this prospectus, we and they will not,
without the prior written consent of Salomon Smith Barney, dispose of or hedge
any notes, any shares of our common stock or any securities convertible into or
exchangeable for our common stock. However, we may issue shares of our class A
common stock in the concurrent public offering and upon conversion of the notes,
we may issue shares of common stock in connection with our corporate
reorganization, and we may grant options to purchase shares of our common stock
and issue shares of our common stock upon the exercise of outstanding options
under our existing stock option plans. We may also issue restricted shares of
common stock pursuant to our stock incentive plan. In addition, we may issue or
sell common stock in connection with an acquisition or business combination, and
Citigroup may privately transfer shares of common stock, as long as the acquiror
of that common stock agrees in writing to be bound by the obligations and
restrictions of our lock-up agreement for the remainder of the 180-day period.

     Prior to this offering of the notes and the concurrent initial public
offering of our class A common stock, there has been no public market for the
notes or our class A common stock. Consequently, the

                                       A-24

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initial public offering price for the notes will be determined by negotiations
among us and the representatives. Among the factors to be considered in
determining the initial public offering price of the notes will be the initial
public offering price of our class A common stock set in the concurrent initial
public offering thereof, our record of operations, our current financial
condition, our future prospects, our markets, the economic conditions in and
future prospects for the industry in which we compete, our management and
currently prevailing general conditions in the equity securities markets,
including current market valuations of publicly traded companies considered
comparable to our company. We cannot assure you, however, that the prices at
which the notes will sell in the public market after this offering will not be
lower than their initial public offering price or that an active trading market
in the notes will develop and continue after this offering.


     We have applied to list our notes on the New York Stock Exchange under the
symbol "TPK."


     The following table shows the underwriting discounts and commissions that
we are to pay to the underwriters in connection with this offering. These
amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional notes.



                                                                         PAID BY
                                                            TRAVELERS PROPERTY CASUALTY CORP.
                                                            ----------------------------------
                                                             NO EXERCISE        FULL EXERCISE
                                                            -------------      ---------------
                                                                         
Per Note..................................................     $                   $
Total.....................................................     $                   $


     In connection with this offering, Salomon Smith Barney Inc. on behalf of
the underwriters may purchase and sell the notes in the open market. These
transactions may include short sales, syndicate covering transactions and
stabilizing transactions. Short sales involve syndicate sales in excess of the
principal amount of notes to be purchased by the underwriters in this offering,
which creates a syndicate short position. "Covered" short sales are sales made
in an amount up to the principal amount of notes represented by the
underwriters' over-allotment option. In determining the source of notes to close
out the covered syndicate short position, the underwriters will consider, among
other things, the price of notes available for purchase in the open market as
compared to the price at which they may purchase notes through the
over-allotment option. Transactions to close out the covered syndicate short
involve either purchases of notes in the open market after the distribution has
been completed or the exercise of the over-allotment option. The underwriters
may also make "naked" short sales of notes in excess of the over-allotment
option. The underwriters must close out any naked short position by purchasing
notes in the open market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward pressure on the price
of the notes in the open market after pricing that could adversely affect
investors who purchase in the offering. Stabilizing transactions consist of bids
for or purchases of notes in the open market while this offering is in progress.

     The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney repurchases notes originally sold by that syndicate member
in order to cover syndicate short positions or make stabilizing purchases.

     Any of these activities may have the effect of preventing or retarding a
decline in the market price of the notes. They may also cause the price of the
notes to be higher than the price that would otherwise exist in the open market
in the absence of these transactions. The underwriters may conduct these
transactions on the New York Stock Exchange or in the over-the-counter market,
or otherwise. If the underwriters commence any of these transactions, they may
discontinue them at any time.

     Because Salomon Smith Barney Inc. is a member of the NYSE and because of
its relationship to us, it will not be permitted under the rules of the NYSE to
solicit the purchase or sale of our shares or make recommendations regarding the
purchase or sale of our shares. This may harm the trading market for the shares.
These restrictions will not apply after the tax-free distribution by Citigroup
to its stockholders of its entire ownership interest in us.

     We estimate that our portion of the total expenses of this offering will be
$          .

                                       A-25

     [ALTERNATE PAGE FOR CONVERTIBLE JUNIOR SUBORDINATED NOTES PROSPECTUS]

     Because an affiliate of Salomon Smith Barney Inc. beneficially owns more
than 10% of our class A common stock outstanding prior to the closing of this
offering, it may be deemed to have a "conflict of interest" with us under Rule
2720 of the National Association of Securities Dealers, Inc. When a NASD member
with a conflict of interest participates as an underwriter in a public offering,
that rule requires that the initial public offering price may be no higher than
that recommended by a "qualified independent underwriter," as defined by the
NASD. In accordance with this rule, Merrill Lynch, Pierce, Fenner & Smith
Incorporated has assumed the responsibilities of acting as a qualified
independent underwriter. In its role as a qualified independent underwriter,
Merrill Lynch has performed a due diligence investigation and participated in
the preparation of this prospectus and the registration statement of which this
prospectus is a part. Merrill Lynch will not receive any additional fees for
serving as qualified independent underwriter in connection with this offering.
We have agreed to indemnify Merrill Lynch against liabilities incurred in
connection with acting as a qualified independent underwriter, including
liabilities under the Securities Act.

     The underwriters may, from time to time, engage in transactions with and
perform services for us in the ordinary course of their business. See
"Arrangements Between Our Company and Citigroup."

     A prospectus in electronic format may be made available on the websites
maintained by one or more of the underwriters. The representatives may agree to
allocate a number of notes to underwriters for sale to their online brokerage
account holders. The representatives will allocate notes to underwriters that
may make Internet distributions on the same basis as other allocations. In
addition, notes may be sold by the underwriters to securities dealers who resell
notes to online brokerage account holders.

     We and Citigroup have agreed to indemnify the underwriters against some
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriters may be required to make because of any
of those liabilities.

                                       A-26

     [ALTERNATE PAGE FOR CONVERTIBLE JUNIOR SUBORDINATED NOTES PROSPECTUS]

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

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF
THIS PROSPECTUS.

     UNTIL        , 2002 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE OUR NOTES, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN
ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

                                  $850,000,000

                       TRAVELERS PROPERTY CASUALTY CORP.

                                [TRAVELERS LOGO]

                % CONVERTIBLE JUNIOR SUBORDINATED NOTES DUE 2032

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

                                   PROSPECTUS

                                     , 2002

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

                              SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
          GOLDMAN, SACHS & CO.
                    MERRILL LYNCH & CO.
                              RAMIREZ & CO., INC.
                                       UTENDAHL CAPITAL PARTNERS, L.P.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                       A-27


                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the various expenses payable by us in
connection with the shares of class A common stock being registered hereby. All
of the fees set forth below are estimates except for the SEC registration fee,
the NASD fee and the NYSE listing fee.



                                                             
SEC registration fee........................................    $  485,898
NASD fee....................................................        30,500
NYSE listing fee............................................       250,000
Blue Sky fees and expenses..................................             0
Printing and engraving expenses.............................     1,600,000
Legal fees and expenses.....................................     7,000,000
Accounting fees and expenses................................       400,000
Transfer agent and registrar fees...........................        25,000
Miscellaneous fees and expenses.............................        28,602
                                                                ----------
     Total..................................................    $9,820,000
                                                                ==========



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


ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS


     Subsection (a) of Section 33-771 of the Connecticut Business Corporation
Act, or the CBCA, provides that a corporation may indemnify an individual who is
a party to a proceeding because he is a director against liability incurred in
the proceeding if: (1)(A) he conducted himself in good faith; (B) he reasonably
believed (i) in the case of conduct in his official capacity, that his conduct
was in the best interests of the corporation; and (ii) in all other cases, that
his conduct was at least not opposed to the best interests of the corporation;
and (C) in the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful; or (2) he engaged in conduct for which broader
indemnification has been made permissible or obligatory under a provision of the
certificate of incorporation as authorized by the CBCA.

     Subsection (b) of Section 33-771 of the CBCA provides that a director's
conduct with respect to an employee benefit plan for a purpose he reasonably
believed to be in the interests of the participants in and beneficiaries of the
plan is conduct that satisfies the requirement that his conduct was at least not
opposed to the best interests of the corporation.

     Subsection (c) of Section 33-771 of the CBCA provides that the termination
of a proceeding by judgment, order, settlement or conviction or upon a plea of
nolo contendere or its equivalent is not, of itself, determinative that the
director did not meet the relevant standard of conduct described in Section
33-771 of the CBCA.

     Subsection (d) of Section 33-771 of the CBCA provides that, unless ordered
by a court, a corporation may not indemnify a director: (1) in connection with a
proceeding by or in the right of the corporation except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
has met the relevant standard of conduct under Section 33-771(a) of the CBCA; or
(2) in connection with any proceeding with respect to conduct for which he was
adjudged liable on the basis that he received a financial benefit to which he
was not entitled, whether or not involving action in his official capacity.

     Section 33-772 of the CBCA provides that a corporation shall indemnify a
director of the corporation who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a

                                       II-1


party because he was a director of the corporation, against reasonable expenses
incurred by him in connection with the proceeding.

     Subsection (a) of Section 33-776 of the CBCA provides that a corporation
may indemnify an officer of the corporation who is a party to a proceeding
because he is an officer of the corporation (1) to the same extent as a
director, and (2) if he is an officer but not a director, to such further
extent, consistent with public policy, as may be provided by contract, the
certificate of incorporation, the bylaws or a resolution of the board of
directors. Subsection (c) of Section 33-776 of the CBCA provides that an officer
of the corporation who is not a director is entitled to mandatory
indemnification under Section 33-772 to the same extent to which a director may
be entitled to indemnification.

     Citigroup Inc. (the ultimate parent) also provides liability insurance for
its directors and officers and the directors and officers of its subsidiaries,
including the Registrant. This insurance provides for coverage against loss from
claims made against directors and officers in their capacity as such, including,
subject to certain exceptions, liabilities under the federal securities laws.

     Article FIFTEENTH of our certificate of incorporation provides that we will
indemnify, and advance expenses to, all directors and officers to the fullest
extent permitted by the CBCA and that we will indemnify all directors for
liability, as defined in Section 33-770(5) of the CBCA, to any person for any
action taken, or any failure to take any action, as a director, except liability
that: (a) involved a knowing and culpable violation of law by the director; (b)
enabled the director or an associate (as defined in Section 33-840 of the CBCA)
to receive an improper personal gain; (c) showed a lack of good faith and
conscious disregard for the duty of the director to us under circumstances in
which the director was aware that his conduct or omission created an
unjustifiable risk of serious injury to us; (d) constituted a sustained and
unexcused pattern of inattention that amounted to an abdication of the
director's duty to us; or (e) created liability under Section 33-757 of the
CBCA. Notwithstanding the preceding sentence, we will not be required to
indemnify an indemnitee in connection with a proceeding (or part thereof)
commenced by the indemnitee against us. Article FIFTEENTH does not affect the
indemnification or advance of expenses to a director for any liability stemming
from acts or omissions occurring prior to the effective date of Article
FIFTEENTH.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     In February 2002, the Registrant issued a $1.2 billion note agreement
payable in 2005 to Citigroup in replacement of a $1.2 billion note agreement
payable to Citigroup in 2005. The replacement note agreement was issued in
reliance on the exemption from registration provided by Section 3(a)(9) of the
Securities Act.

     In March 2002, the Registrant issued 269,000,000 shares of Class A Common
Stock and 500,000,000 shares of Class B Common Stock in exchange for 1,500
shares of common stock pursuant to a recapitalization transaction. The shares of
Class A Common Stock and Class B Common Stock were issued in reliance on the
exemption from registration provided by Section 3(a)(9) of the Securities Act.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a) Exhibits



     
  1.1   Form of U.S. Underwriting Agreement relating to the
        Registrant's Class A Common Stock.
  1.2   Form of International Underwriting Agreement relating to the
        Registrant's Class A Common Stock.
  1.3   Form of Underwriting Agreement relating to the Registrant's
           % Convertible Junior Subordinated Notes due 2032.



                                       II-2



     
  2.1   Stock Purchase Agreement, dated as of November 28, 1995,
        between the Registrant (then known as The Travelers
        Insurance Group Inc.) and Aetna Life and Casualty Company
        (incorporated by reference to Exhibit 10.1 of the Form 10-K
        for the year ended December 31, 1995 of Aetna Life and
        Casualty Company (File No. 15704)).
  3.1   Form of Restated Certificate of Incorporation.
  3.2   Form of Amended and Restated Bylaws.
  4.1   Specimen Certificate of Class A Common Stock.
  4.2   Form of the Registrant's Shareholders' Rights Plan.
  4.3   Form of Indenture between the Registrant and The Bank of New
        York, as trustee.
  4.4   Form of First Supplemental Indenture between the Registrant
        and The Bank of New York, as trustee.
  4.5   Form of Convertible Junior Subordinated Note (included in
        Exhibit 4.4).
  5.1   Opinion of Cummings & Lockwood LLC relating to the Class A
        Common Stock.
  5.2.1 Opinion of Cummings & Lockwood LLC relating to the Class A
        Common Stock issuable in connection with the Convertible
        Junior Subordinated Notes.
  5.2.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP relating
        to the Convertible Junior Subordinated Notes.
 10.1   Form of Intercompany Agreement, between Citigroup and the
        Registrant.
 10.2   Line of credit agreement, dated December 19, 2001 between
        Travelers Insurance Group Holdings Inc. (then known as
        Travelers Property Casualty Corp.) and Citigroup.+
 10.3   Promissory note, dated as of April 13, 2001, by and between
        Travelers Insurance Group Holdings Inc. (then known as
        Travelers Property Casualty Corp.) and Citicorp Banking
        Corporation.+
 10.4.1 Promissory note, dated February 7, 2002, between the
        Registrant and Citicorp.+
 10.4.2 Promissory note, dated February 7, 2002, between the
        Registrant and PFS Services, Inc.+
 10.4.3 Promissory note, dated February 7, 2002, between the
        Registrant and PFS Services, Inc.+
 10.5.1 Travelers Group Capital Accumulation Plan, as amended
        through July 23, 1997 (incorporated by reference to Exhibit
        10.02 of the Form 10-Q for the period ended September 30,
        1997 of Travelers Group Inc.) (File No. 1-9924)).
 10.5.2 Amendment to the Travelers Group Capital Accumulation Plan,
        as amended through July 23, 1997 (incorporated by reference
        to Exhibit 10.08.2 of the Form 10-K/A-1 for the year ended
        December 31, 1999 of Citigroup Inc.) (File No. 1-9924)).
 10.6   Travelers Group Retirement Benefit Equalization Plan, as
        amended (incorporated by reference to Exhibit 10.03 of the
        Form 10-K for the year ended December 31, 1993 of Travelers
        Group Inc. (formerly The Travelers Inc.) (File No. 1-9924)).
 10.7   Form of Amended and Restated Tax Allocation Agreement
        between the Registrant and Citigroup.
 10.8   Lease for office space at CityPlace, dated March 28, 1996,
        by and between Aetna Life and Casualty Company and The
        Travelers Indemnity Company, incorporated by reference to
        Exhibit 10.10 to the registration statement on Form S-1
        filed with the Commission by Travelers Insurance Group
        Holdings Inc. (then known as Travelers/Aetna Property
        Casualty Corp.) on April 22, 1996 (File No. 333-2254).
 10.9   Lease for office space in Hartford, Connecticut, dated as of
        April 2, 1996, by and between The Travelers Insurance
        Company and The Travelers Indemnity Company, incorporated by
        reference to Exhibit 10.14 to the annual report on Form 10-K
        filed with the Commission by Travelers Insurance Group
        Holdings Inc. (then known as Travelers/Aetna Property
        Casualty Corp.).
 10.10  Travelers Property Casualty Corp. Compensation Plan for
        Non-Employee Directors.+
 10.11  Travelers Property Casualty Corp. Executive Performance
        Plan.+
 10.12  Travelers Property Casualty Corp. 2002 Stock Incentive
        Plan.+



                                       II-3




        
    10.13  Employment Agreement of Robert I. Lipp.+
    10.14  Form of Indemnification Agreement between the Registrant and Citigroup.
    12.1   Statement of Ratio of Earnings to Fixed Charges.+
    21.1   Subsidiaries of the Registrant.
    23.1   Consent of KPMG LLP, Independent Certified Public Accountants.
    23.2   Consent of Cummings & Lockwood LLC (contained in its opinions filed as Exhibits 5.1 and 5.2.1 hereto).
    23.3   Consent of Skadden, Arps, Slate, Meagher & Flom LLP (contained in its opinion filed as Exhibit 5.2.2
           hereto).
    24.1   Powers of Attorney.+
    25.1   Statement of eligibility of The Bank of New York, as trustee under the indenture.



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

+ Previously filed


     (b) Financial Statement Schedules


              
Schedule II    --   Condensed Financial Information of Registrant
Schedule III   --   Supplementary Insurance Information -- 2001
Schedule III   --   Supplementary Insurance Information -- 2000
Schedule III   --   Supplementary Insurance Information -- 1999
Schedule V     --   Valuation and Qualifying Accounts
Schedule VI    --   Supplementary Information Concerning Property -- Casualty
                    Insurance Operations


ITEM 17.  UNDERTAKINGS

     (a) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.

     (b) Insofar as indemnification for liabilities existing under the
Securities Act of 1933, as amended (the "Act"), may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

     (c) The undersigned Registrant hereby undertakes that:

          (1) For purposes of determining any liability under the Act, the
     information omitted from the form of prospectus filed as part of this
     registration statement in reliance upon Rule 430A and contained in a form
     of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
     497(h) under the Act shall be deemed to be part of this registration
     statement as of the time it was declared effective.

          (2) For the purpose of determining any liability under the Act, each
     post-effective amendment that contains a form of prospectus shall be deemed
     to be a new registration statement relating to the securities offered
     therein, and the offering of such securities at that time shall be deemed
     to be the initial bona fide offering thereof.

                                       II-4


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this amendment to the Registration Statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Hartford, State of Connecticut on the 19th day of March, 2002.


                                          TRAVELERS PROPERTY CASUALTY CORP.

                                          By: /s/ JAMES M. MICHENER
                                            ------------------------------------
                                              Name: James M. Michener
                                              Title: General Counsel

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:




                SIGNATURE                                    TITLE                        DATE
                ---------                                    -----                        ----
                                                                               



                    *                         Chief Executive Officer (Principal     March 19, 2002
------------------------------------------     Executive Officer), Chairman and
              Robert I. Lipp                               Director




                    *                         Chief Financial Officer (Principal     March 19, 2002
------------------------------------------      Financial Officer) and Director
               Jay S. Benet




                    *                         Chief Accounting Officer (Principal    March 19, 2002
------------------------------------------            Accounting Officer)
            Douglas K. Russell




                    *                                      Director                  March 19, 2002
------------------------------------------
            Charles J. Clarke




                    *                                      Director                  March 19, 2002
------------------------------------------
            Douglas G. Elliot




        *By /s/ JAMES M. MICHENER                      Attorney in fact              March 19, 2002
  --------------------------------------
            James M. Michener



                                       II-5



                          INDEPENDENT AUDITORS' REPORT


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


     Under date of January 17, 2002, except as to Note 1, which is as of March
19, 2002, we reported on the consolidated balance sheets of Travelers Property
Casualty Corp. (formerly known as The Travelers Insurance Group Inc.) and
subsidiaries as of December 31, 2001 and 2000, and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for each
of the years in the three-year period ended December 31, 2001, which are
included in the prospectus. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits.


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

     As discussed in Note 1 to the consolidated financial statements, the
Company changed its methods of accounting for derivative instruments and hedging
activities and for securitized financial assets in 2001, and its methods of
accounting for insurance and reinsurance contracts that do not transfer
insurance risk and for insurance-related assessments in 1999.


                                  /s/ KPMG LLP


Hartford, Connecticut
January 17, 2002, except

as to Note 1, which is as of March 19, 2002



                                       II-6



                                                                     SCHEDULE II

                       TRAVELERS PROPERTY CASUALTY CORP.
                             (PARENT COMPANY ONLY)

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                         CONDENSED STATEMENT OF INCOME



                                                              FOR THE YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                2001        2000        1999
                                                              --------    --------    --------
                                                                       (IN MILLIONS)
                                                                             
REVENUES
Net investment income and other.............................   $    3      $    2      $   11
Realized investment gains...................................       19           9          --
                                                               ------      ------      ------
          Total revenues....................................       22          11          11
                                                               ------      ------      ------
EXPENSES
Interest....................................................       83         161          87
Other.......................................................        6           5          --
                                                               ------      ------      ------
          Total expenses....................................       89         166          87
                                                               ------      ------      ------
Loss before federal income tax benefit and equity in net
  income of subsidiaries....................................      (67)       (155)        (76)
Federal income tax benefit..................................       22          53          27
                                                               ------      ------      ------
Loss before equity in net income of subsidiaries............      (45)       (102)        (49)
Equity in net income of subsidiaries, net of minority
  interest..................................................    1,110       1,414       1,073
                                                               ------      ------      ------
  Net income................................................   $1,065      $1,312      $1,024
                                                               ======      ======      ======


   The condensed financial statements should be read in conjunction with the
 consolidated financial statements and notes thereto and the accompanying notes
              to thecondensed financial information of Registrant.
                                       S-1


                                                                     SCHEDULE II

                       TRAVELERS PROPERTY CASUALTY CORP.
                             (PARENT COMPANY ONLY)

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                            CONDENSED BALANCE SHEET




                                                                 DECEMBER 31,
                                                              ------------------
                                                               2001       2000
                                                              -------    -------
                                                                (IN MILLIONS)
                                                                   
ASSETS
Short-term securities.......................................  $   152    $    37
Investment in subsidiaries at equity........................   11,153     10,714
Goodwill....................................................      155        160
Other assets................................................      452        488
                                                              -------    -------
     Total assets...........................................  $11,912    $11,399
                                                              =======    =======
LIABILITIES
Note payable to parent......................................  $ 1,198    $ 2,156
Other liabilities...........................................       28         29
                                                              -------    -------
     Total liabilities......................................    1,226      2,185
                                                              -------    -------
SHAREHOLDER'S EQUITY
Common stock (see note 1):
  Class A, $.01 par value, 1,500 million shares authorized;
     269 million shares issued and outstanding..............        3          3
  Class B, $.01 par value, 1,500 million shares authorized;
     500 million shares issued and outstanding..............        5          5
Additional paid-in capital..................................    4,432      3,815
Retained earnings...........................................    6,004      4,990
Accumulated other changes in equity from nonowner sources...      242        401
                                                              -------    -------
     Total shareholder's equity.............................   10,686      9,214
                                                              -------    -------
     Total liabilities and shareholder's equity.............  $11,912    $11,399
                                                              =======    =======



   The condensed financial statements should be read in conjunction with the
 consolidated financial statements and notes thereto and the accompanying notes
              to thecondensed financial information of Registrant.
                                       S-2


                                                                     SCHEDULE II

                       TRAVELERS PROPERTY CASUALTY CORP.
                             (PARENT COMPANY ONLY)

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                       CONDENSED STATEMENT OF CASH FLOWS



                                                               FOR THE YEAR ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                2001        2000        1999
                                                              ---------   ---------   ---------
                                                                        (IN MILLIONS)
                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................   $ 1,065     $ 1,312     $ 1,024
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Equity in net income of subsidiaries......................    (1,110)     (1,414)     (1,073)
  Dividends received from consolidated subsidiaries.........     1,100       1,226         164
  Deferred federal income tax benefit.......................        29           3          (7)
  Federal income taxes receivable...........................        27         (28)         (9)
  Other.....................................................        87        (228)         73
                                                               -------     -------     -------
     Net cash provided by operating activities..............     1,198         871         172
                                                               -------     -------     -------
CASH FLOWS FROM INVESTING ACTIVITIES
  Tender offer of minority interest shareholders'...........        --      (2,399)         --
  Short-term securities, (purchases) sales, net.............      (115)        (36)          8
  Other investments, net....................................        --          (1)         --
                                                               -------     -------     -------
     Net cash provided by (used in) investing activities....      (115)     (2,436)          8
                                                               -------     -------     -------
CASH FLOWS FROM FINANCING ACTIVITIES
  Payment of long-term debt.................................    (1,040)     (1,688)       (738)
  Issuance of note payable to affiliate.....................        --       2,391          --
  Receipts from former subsidiaries.........................       475         859         553
  Return of capital from former subsidiaries................         8           3           5
  Dividends to parent company...............................      (526)         --          --
                                                               -------     -------     -------
     Net cash provided by (used in) financing activities....    (1,083)      1,565        (180)
                                                               -------     -------     -------
     Net decrease in cash...................................        --          --          --
     Cash at beginning of period............................        --          --          --
                                                               -------     -------     -------
     Cash at end of period..................................   $    --     $    --     $    --
                                                               =======     =======     =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid during the period for interest..................   $    10     $    21     $     6
                                                               =======     =======     =======
  Cash received during the period for taxes.................   $   (88)    $   (29)    $   (10)
                                                               =======     =======     =======


   The condensed financial statements should be read in conjunction with the
 consolidated financial statements and notes thereto and the accompanying notes
              to thecondensed financial information of Registrant.
                                       S-3


                                                                     SCHEDULE II

             NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1. GENERAL


     The condensed consolidated financial statements include the accounts of
Travelers Property Casualty Corp. (TPC), an indirect, wholly-owned subsidiary of
Citigroup Inc. (Citigroup), and its subsidiaries (collectively, the Company).
TPC is being reorganized in connection with Citigroup's announced plans for the
sale by TPC's of up to 20% of its property casualty business in a proposed
initial public offering, followed by a tax-free distribution of a portion of
Citigroup's ownership interest in TPC, which together with the shares being
offered in the initial public offering will represent approximately 90.1% of
TPC's common equity (more than 90% of the combined voting power of all classes
of TPC's voting securities), subject to regulatory approval and receipt of a
private letter ruling from the Internal Revenue Service. These financial
statements include the adjustments necessary to reflect the reorganization of
TPC's operations as if those changes have been consummated prior to the proposed
public offering.


     These financial statements include the accounts of its primary subsidiary,
Travelers Insurance Group Holdings Inc. (TIGHI), a property casualty insurance
holding company. Also included are the accounts of CitiInsurance International
Holdings Inc. and its subsidiaries (CitiInsurance), whose principal assets are
its investments in the property casualty and life operations of Fubon Insurance
Co., Ltd. and Fubon Assurance Co., Ltd. TPC intends to sell CitiInsurance to
other Citigroup affiliated companies for approximately $418 million, its net
book value. It has also agreed to purchase from Citigroup the premises located
at One Tower Square, Hartford, Connecticut and other properties for $68 million.


     Pursuant to the reorganization referred to above, these financial
statements have been adjusted to exclude the accounts of certain wholly-owned
TPC subsidiaries, principally The Travelers Insurance Company (TIC) and its
subsidiaries (its U.S. life insurance operations), certain other wholly-owned
non-insurance subsidiaries of TPC and substantially all of TPC's assets and
certain liabilities not related to the property casualty business. Additionally,
shares have been adjusted to give effect to the recapitalization in March 2002,
whereby the outstanding shares of common stock (1,500 shares) will be changed
into 269,000,000 shares of class A common stock and 500,000,000 shares of class
B common stock. Significant intercompany transactions and balances have been
eliminated.


2. PRINCIPLES OF CONSOLIDATION

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

3. DEBT

     In conjunction with the purchase of TIGHI's outstanding shares in April
2000, TPC entered into a note agreement with Citigroup. On February 7, 2002,
this note agreement was replaced by a new note agreement. Under the terms of the
new note agreement, interest accrues on the aggregate principal amount
outstanding at the commercial paper rate (the then current short-term rate) plus
10 basis points per annum. Interest is compounded monthly. The principal amount
of the note may be prepaid in whole or in part without penalty and is due on
April 30, 2005. At December 31, 2001 and 2000, the principal outstanding under
the prior note agreement was $1.2 billion and $1.9 billion, respectively. March
1, 2002, the outstanding amount under the new note agreement was $1.1 billion.

     At December 31, 2000, TPC had a note payable to PFS Services, Inc., its
direct parent. The principal balance outstanding was $287 million. Interest
accrued at a rate of 5.06%, compounded semi-annually. On March 29, 2001, this
note was repaid in its entirety, plus accrued interest.

     In February 2002, TPC's board of directors declared a dividend of $1.0
billion to Citigroup in the form of a non-interest bearing note payable on
December 31, 2002.

     In February 2002, TPC's board of directors also declared a dividend of $3.7
billion to Citigroup in the form of a 3.7 billion note payable in two
installments. The first installment of $150 million will be payable

                                       S-4

     NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)

on May 9, 2004 and the second installment of 3.55 billion will be payable on
February 7, 2017. This note begins to bear interest after May 9, 2002 at a rate
of 7.25% per annum. This note may be prepaid at any time in whole or in part
without penalty or premium.

     Concurrently with the initial public offering, TPC is offering $850 million
aggregate principal amount of its convertible junior subordinated notes due
2032.

                                       S-5


                                  SCHEDULE III

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

                      SUPPLEMENTARY INSURANCE INFORMATION

                                      2001



                                                                                                                     CLAIMS
                                                             CLAIMS AND                                 NET        AND CLAIM
                                      DEFERRED POLICY     CLAIM ADJUSTMENT    UNEARNED    PREMIUM    INVESTMENT    ADJUSTMENT
SEGMENT                              ACQUISITION COSTS    EXPENSE RESERVES    PREMIUMS    REVENUE    INCOME(A)      EXPENSES
-------                              -----------------    ----------------    --------    -------    ----------    ----------
                                                                          (IN MILLIONS)
                                                                                                 
Commercial Lines...................        $466               $27,749          $3,729     $5,431       $1,615        $4,702
Personal Lines.....................         302                 2,867           1,938      3,964          410         3,053
                                           ----               -------          ------     ------       ------        ------
    Total -- Reportable Segments...         768                30,616           5,667      9,395        2,025         7,755
Other..............................          --                   121              --         16            9            10
                                           ----               -------          ------     ------       ------        ------
Consolidated.......................        $768               $30,737          $5,667     $9,411       $2,034        $7,765
                                           ====               =======          ======     ======       ======        ======


                                     AMORTIZATION
                                     OF DEFERRED
                                        POLICY          OTHER
                                     ACQUISITION      OPERATING     PREMIUMS
SEGMENT                                 COSTS        EXPENSES(B)    WRITTEN
-------                              ------------    -----------    --------
                                                  (IN MILLIONS)
                                                           
Commercial Lines...................     $  861         $  931        $5,726
Personal Lines.....................        674            388         4,108
                                        ------         ------        ------
    Total -- Reportable Segments...      1,535          1,319         9,834
Other..............................          4            219            12
                                        ------         ------        ------
Consolidated.......................     $1,539         $1,538        $9,846
                                        ======         ======        ======


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

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

                                       S-6


                                  SCHEDULE III

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

                      SUPPLEMENTARY INSURANCE INFORMATION

                                      2000



                                                                                                                     CLAIMS
                                                             CLAIMS AND                                 NET        AND CLAIM
                                      DEFERRED POLICY     CLAIM ADJUSTMENT    UNEARNED    PREMIUM    INVESTMENT    ADJUSTMENT
SEGMENT                              ACQUISITION COSTS    EXPENSE RESERVES    PREMIUMS    REVENUE    INCOME(A)      EXPENSES
-------                              -----------------    ----------------    --------    -------    ----------    ----------
                                                                          (IN MILLIONS)
                                                                                                 
Commercial Lines...................        $341               $25,672          $3,028     $4,747       $1,713        $3,739
Personal Lines.....................         273                 2,640           1,764      3,715          446         2,734
                                           ----               -------          ------     ------       ------        ------
    Total -- Reportable Segments...         614                28,312           4,792      8,462        2,159         6,473
Other..............................          --                   130              --         --            3            --
                                           ----               -------          ------     ------       ------        ------
Consolidated.......................        $614               $28,442          $4,792     $8,462       $2,162        $6,473
                                           ====               =======          ======     ======       ======        ======


                                     AMORTIZATION
                                     OF DEFERRED
                                        POLICY          OTHER
                                     ACQUISITION      OPERATING     PREMIUMS
SEGMENT                                 COSTS        EXPENSES(B)    WRITTEN
-------                              ------------    -----------    --------
                                                  (IN MILLIONS)
                                                           
Commercial Lines...................     $  680         $  752        $5,030
Personal Lines.....................        618            363         3,813
                                        ------         ------        ------
    Total -- Reportable Segments...      1,298          1,115         8,843
Other..............................         --            321            --
                                        ------         ------        ------
Consolidated.......................     $1,298         $1,436        $8,843
                                        ======         ======        ======


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

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

                                       S-7


                                  SCHEDULE III

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

                      SUPPLEMENTARY INSURANCE INFORMATION

                                      1999



                                                                                                                     CLAIMS
                                                             CLAIMS AND                                 NET        AND CLAIM
                                      DEFERRED POLICY     CLAIM ADJUSTMENT    UNEARNED    PREMIUM    INVESTMENT    ADJUSTMENT
SEGMENT                              ACQUISITION COSTS    EXPENSE RESERVES    PREMIUMS    REVENUE    INCOME(A)      EXPENSES
-------                              -----------------    ----------------    --------    -------    ----------    ----------
                                                                          (IN MILLIONS)
                                                                                                 
Commercial Lines...................        $277               $26,184          $2,608     $4,375       $1,689        $3,505
Personal Lines.....................         248                 2,670           1,666      3,634          400         2,554
                                           ----               -------          ------     ------       ------        ------
    Total -- Reportable Segments...         525                28,854           4,274      8,009        2,089         6,059
Other..............................          --                   149              --         --            4            --
                                           ----               -------          ------     ------       ------        ------
Consolidated.......................        $525               $29,003          $4,274     $8,009       $2,093        $6,059
                                           ====               =======          ======     ======       ======        ======


                                     AMORTIZATION
                                     OF DEFERRED
                                        POLICY          OTHER
                                     ACQUISITION      OPERATING     PREMIUMS
SEGMENT                                 COSTS        EXPENSES(B)    WRITTEN
-------                              ------------    -----------    --------
                                                  (IN MILLIONS)
                                                           
Commercial Lines...................     $  617         $  805        $4,408
Personal Lines.....................        643            364         3,805
                                        ------         ------        ------
    Total -- Reportable Segments...      1,260          1,169         8,213
Other..............................         --            246            --
                                        ------         ------        ------
Consolidated.......................     $1,260         $1,415        $8,213
                                        ======         ======        ======


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

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

                                       S-8


                                   SCHEDULE V
                       TRAVELERS PROPERTY CASUALTY CORP.
                       VALUATION AND QUALIFYING ACCOUNTS
                                ($ IN MILLIONS)



                                                            ADDITIONS
                                                    --------------------------
                                                                  CHARGED TO
                                       BALANCE AT   CHARGED TO       OTHER                      BALANCE AT
                                       BEGINNING    COSTS AND      ACCOUNTS      DEDUCTIONS--     END OF
DESCRIPTION                            OF PERIOD     EXPENSES     --DESCRIBE       DESCRIBE       PERIOD
-----------                            ----------   ----------   -------------   ------------   ----------
                                                                                 
                                                         2001
  Reinsurance Recoverables...........     $213       $     --        $130(1)         $57(2)        $286
                                          ====                                                     ====
                                                         2000
  Reinsurance Recoverables...........     $219       $     --        $ --            $ 6(2)        $213
                                          ====                                                     ====
                                                         1999
  Reinsurance Recoverables...........     $192       $     --        $ 33(1)         $ 6(2)        $219
                                          ====                                                     ====


---------------
(1) Charged to claims and claim adjustment expenses in the consolidated
    statement of income.

(2) Credited to the related asset account.

                                       S-9


                                  SCHEDULE VI

               TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES

 SUPPLEMENTARY INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS(1)

                                   1999-2001



                                                   RESERVES FOR
                                                      UNPAID        DISCOUNT
                                      DEFERRED        CLAIMS          FROM
                                       POLICY       AND CLAIM       RESERVES                              NET
                                     ACQUISITION    ADJUSTMENT     FOR UNPAID    UNEARNED    EARNED    INVESTMENT
AFFILIATION WITH REGISTRANT             COSTS        EXPENSES      CLAIMS(2)     PREMIUMS   PREMIUMS     INCOME
---------------------------          -----------   ------------   ------------   --------   --------   ----------
                                                                    (IN MILLIONS)
                                                                                     
2001 Consolidated
  property -- casualty
  operations.......................     $768         $30,616          $792        $5,667     $9,395      $2,025
2000 Consolidated
  property -- casualty
  operations.......................     $614         $28,312          $800        $4,792     $8,462      $2,159
1999 Consolidated
  property -- casualty
  operations.......................     $525         $28,854          $832        $4,274     $8,009      $2,089


                                          CLAIMS AND
                                       CLAIM ADJUSTMENT
                                           EXPENSES         AMORTIZATION
                                     INCURRED RELATED TO:   OF DEFERRED    PAID CLAIMS
                                     --------------------      POLICY       AND CLAIM
                                      CURRENT      PRIOR    ACQUISITION    ADJUSTMENT    PREMIUMS
AFFILIATION WITH REGISTRANT            YEAR        YEAR        COSTS        EXPENSES     WRITTEN
---------------------------          ---------    -------   ------------   -----------   --------
                                                            (IN MILLIONS)
                                                                          
2001 Consolidated
  property -- casualty
  operations.......................    $7,599      $ (41)      $1,535        $7,419       $9,834
2000 Consolidated
  property -- casualty
  operations.......................    $6,509      $(247)      $1,298        $6,810       $8,843
1999 Consolidated
  property -- casualty
  operations.......................    $6,194      $(242)      $1,260        $6,732       $8,213


---------------
(1) Excludes accident and health business.

(2) See "Discounting" on page 71.

                                       S-10