12. CONSOLIDATING FINANCIAL STATEMENTS OF THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

The following consolidating financial statements of the Company have been prepared pursuant to Rule 3-10 of Regulation S-X. These consolidating financial statements have been prepared from the Company’s financial information on the same basis of accounting as the consolidated financial statements. The Travelers Companies, Inc. has fully and unconditionally guaranteed certain debt obligations of TPC, which totaled $700 million at March 31, 2014.

Prior to the merger of TPC and SPC in 2004, TPC fully and unconditionally guaranteed the payment of all principal, premiums, if any, and interest on certain debt obligations of its wholly-owned subsidiary, Travelers Insurance Group Holdings, Inc. (TIGHI). Concurrent with the merger, The Travelers Companies, Inc. fully and unconditionally assumed such guarantee obligations of TPC. TPC is deemed to have no assets or operations independent of TIGHI. Consolidating financial information for TIGHI has not been presented herein because such financial information would be substantially the same as the financial information provided for TPC.

CONSOLIDATING STATEMENT OF INCOME (Unaudited)

For the three months ended March 31, 2014

(in millions)	TPC		Other Subsidiaries			Travelers (2)			Eliminations			Consolidated
Revenues
Premiums	$	3,944	$	1,879		$	—		$	—		$	5,823
Net investment income	500		235			1			—			736
Fee income	107		—			—			—			107
Net realized investment gains (losses) (1)	1		(2		)	2			—			1
Other revenues	33		8			—			—			41
Total revenues	4,585		2,120			3			—			6,708
Claims and expenses
Claims and claim adjustment expenses	2,221		1,094			—			—			3,315
Amortization of deferred acquisition costs	635		315			—			—			950
General and administrative expenses	613		265			3			—			881
Interest expense	12		—			80			—			92
Total claims and expenses	3,481		1,674			83			—			5,238
Income (loss) before income taxes	1,104		446			(80		)	—			1,470
Income tax expense (benefit)	321		125			(28		)	—			418
Net income of subsidiaries	—		—			1,104			(1,104		)	—
Net income	$	783	$	321		$	1,052		$	(1,104	)	$	1,052

(1) Total other-than-temporary impairment (OTTI) for the three months ended March 31, 2014, and the amounts comprising total OTTI that were recognized in net realized investment gains (losses) and in other comprehensive income (OCI) were as follows:

(in millions)	TPC			Other Subsidiaries			Travelers (2)		Eliminations		Consolidated

Total OTTI losses	$	(2	)	$	(5	)	$	—	$	—	$	(7	)
OTTI losses recognized in net realized investment gains (losses)	$	(4	)	$	(5	)	$	—	$	—	$	(9	)
OTTI gains recognized in OCI	$	2		$	—		$	—	$	—	$	2

(2) The Travelers Companies, Inc., excluding its subsidiaries.

CONSOLIDATING STATEMENT OF INCOME (Unaudited)

For the three months ended March 31, 2013

(in millions)	TPC			Other Subsidiaries		Travelers (2)			Eliminations			Consolidated
Revenues
Premiums	$	3,741		$	1,776	$	—		$	—		$	5,517
Net investment income	455			213		2			—			670
Fee income	96			1		—			—			97
Net realized investment gains (losses) (1)	(7		)	16		1			—			10
Other revenues	29			5		—			—			34
Total revenues	4,314			2,011		3			—			6,328
Claims and expenses
Claims and claim adjustment expenses	2,131			1,022		—			—			3,153
Amortization of deferred acquisition costs	637			311		—			—			948
General and administrative expenses	630			286		(1		)	—			915
Interest expense	17			—		75			—			92
Total claims and expenses	3,415			1,619		74			—			5,108
Income (loss) before income taxes	899			392		(71		)	—			1,220
Income tax expense (benefit)	249			99		(24		)	—			324
Net income of subsidiaries	—			—		943			(943		)	—
Net income	$	650		$	293	$	896		$	(943	)	$	896

(1) Total other-than-temporary impairment (OTTI) for the three months ended March 31, 2013, and the amounts comprising total OTTI that were recognized in net realized investment gains (losses) and in other comprehensive income (OCI) were as follows:

(in millions)	TPC			Other Subsidiaries			Travelers (2)		Eliminations		Consolidated

Total OTTI gains (losses)	$	(3	)	$	3		$	—	$	—	$	—
OTTI losses recognized in net realized investment gains (losses)	$	(4	)	$	(1	)	$	—	$	—	$	(5	)
OTTI gains recognized in OCI	$	1		$	4		$	—	$	—	$	5

(2) The Travelers Companies, Inc., excluding its subsidiaries.

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the three months ended March 31, 2014

(in millions)	TPC			Other Subsidiaries			Travelers (1)		Eliminations			Consolidated

Net income	$	783		$	321		$	1,052	$	(1,104	)	$	1,052

Other comprehensive income:
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	391			146			—		—			537
Having credit losses recognized in the consolidated statement of income	7			(5		)	—		—			2
Net changes in benefit plan assets and obligations	—			—			15		—			15
Net changes in unrealized foreign currency translation	(25		)	(18		)	—		—			(43		)
Other comprehensive income before income taxes and other comprehensive income of subsidiaries	373			123			15		—			511
Income tax expense	143			45			6		—			194
Other comprehensive income, net of taxes, before other comprehensive income of subsidiaries	230			78			9		—			317
Other comprehensive income of subsidiaries	—			—			308		(308		)	—
Other comprehensive income	230			78			317		(308		)	317
Comprehensive income	$	1,013		$	399		$	1,369	$	(1,412	)	$	1,369

(1) The Travelers Companies, Inc., excluding its subsidiaries.

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the three months ended March 31, 2013

(in millions)	TPC			Other Subsidiaries			Travelers (1)			Eliminations			Consolidated

Net income	$	650		$	293		$	896		$	(943	)	$	896

Other comprehensive income (loss):
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	(315		)	(67		)	6			—			(376		)
Having credit losses recognized in the consolidated statement of income	7			2			—			—			9
Net changes in benefit plan assets and obligations	1			2			25			—			28
Net changes in unrealized foreign currency translation	(10		)	(86		)	—			—			(96		)
Other comprehensive income (loss) before income taxes and other comprehensive loss of subsidiaries	(317		)	(149		)	31			—			(435		)
Income tax expense (benefit)	(108		)	(28		)	11			—			(125		)
Other comprehensive income (loss), net of taxes, before other comprehensive loss of subsidiaries	(209		)	(121		)	20			—			(310		)
Other comprehensive loss of subsidiaries	—			—			(330		)	330			—
Other comprehensive loss	(209		)	(121		)	(310		)	330			(310		)
Comprehensive income	$	441		$	172		$	586		$	(613	)	$	586

(1) The Travelers Companies, Inc., excluding its subsidiaries.

CONSOLIDATING BALANCE SHEET (Unaudited)

At March 31, 2014

(in millions)	TPC		Other Subsidiaries			Travelers (1)			Eliminations			Consolidated
Assets
Fixed maturities, available for sale, at fair value (amortized cost $61,995)	$	44,090	$	20,141		$	40		$	—		$	64,271
Equity securities, available for sale, at fair value (cost $660)	311		495			132			—			938
Real estate investments	32		904			—			—			936
Short-term securities	1,935		526			1,573			—			4,034
Other investments	2,534		1,004			1			—			3,539
Total investments	48,902		23,070			1,746			—			73,718
Cash	139		119			2			—			260
Investment income accrued	468		210			8			—			686
Premiums receivable	4,229		2,073			—			—			6,302
Reinsurance recoverables	6,230		3,360			—			—			9,590
Ceded unearned premiums	744		107			—			—			851
Deferred acquisition costs	1,591		245			—			—			1,836
Contractholder receivables	3,226		1,135			—			—			4,361
Goodwill	2,611		1,013			—			—			3,624
Other intangible assets	241		98			—			—			339
Investment in subsidiaries	—		—			29,171			(29,171		)	—
Other assets	1,921		457			189			—			2,567
Total assets	$	70,302	$	31,887		$	31,116		$	(29,171	)	$	104,134
Liabilities
Claims and claim adjustment expense reserves	$	33,326	$	17,262		$	—		$	—		$	50,588
Unearned premium reserves	8,230		3,687			—			—			11,917
Contractholder payables	3,226		1,135			—			—			4,361
Payables for reinsurance premiums	191		179			—			—			370
Deferred taxes	1		(5		)	58			—			54
Debt	692		—			5,655			—			6,347
Other liabilities	3,979		1,105			26			—			5,110
Total liabilities	49,645		23,363			5,739			—			78,747
Shareholders’ equity
Common stock (1,750.0 shares authorized; 347.5 shares issued and outstanding)	—		390			21,603			(390		)	21,603
Additional paid-in capital	11,634		6,502			—			(18,136		)	—
Retained earnings	8,026		1,131			25,157			(9,147		)	25,167
Accumulated other comprehensive income	997		501			1,127			(1,498		)	1,127
Treasury stock, at cost (410.0 shares)	—		—			(22,510		)	—			(22,510		)
Total shareholders’ equity	20,657		8,524			25,377			(29,171		)	25,387
Total liabilities and shareholders’ equity	$	70,302	$	31,887		$	31,116		$	(29,171	)	$	104,134

(1) The Travelers Companies, Inc., excluding its subsidiaries.

CONSOLIDATING BALANCE SHEET (Unaudited)

At December 31, 2013

(in millions)	TPC		Other Subsidiaries		Travelers (1)			Eliminations			Consolidated
Assets
Fixed maturities, available for sale, at fair value (amortized cost $62,196)	$	43,720	$	20,199	$	37		$	—		$	63,956
Equity securities, available for sale, at fair value (cost $686)	329		484		130			—			943
Real estate investments	33		905		—			—			938
Short-term securities	1,867		492		1,523			—			3,882
Other investments	2,450		990		1			—			3,441
Total investments	48,399		23,070		1,691			—			73,160
Cash	137		154		3			—			294
Investment income accrued	499		231		4			—			734
Premiums receivable	4,124		2,001		—			—			6,125
Reinsurance recoverables	6,292		3,421		—			—			9,713
Ceded unearned premiums	712		89		—			—			801
Deferred acquisition costs	1,570		234		—			—			1,804
Deferred taxes	279		86		(62		)	—			303
Contractholder receivables	3,179		1,149		—			—			4,328
Goodwill	2,619		1,015		—			—			3,634
Other intangible assets	250		101		—			—			351
Investment in subsidiaries	—		—		28,616			(28,616		)	—
Other assets	2,010		357		198			—			2,565
Total assets	$	70,070	$	31,908	$	30,450		$	(28,616	)	$	103,812
Liabilities
Claims and claim adjustment expense reserves	$	33,506	$	17,389	$	—		$	—		$	50,895
Unearned premium reserves	8,188		3,662		—			—			11,850
Contractholder payables	3,179		1,149		—			—			4,328
Payables for reinsurance premiums	127		171		—			—			298
Debt	692		—		5,654			—			6,346
Other liabilities	4,109		1,180		10			—			5,299
Total liabilities	49,801		23,551		5,664			—			79,016
Shareholders’ equity
Common stock (1,750.0 shares authorized; 353.5 shares issued and outstanding)	—		390		21,500			(390		)	21,500
Additional paid-in capital	11,634		6,502		—			(18,136		)	—
Retained earnings	7,868		1,042		24,281			(8,900		)	24,291
Accumulated other comprehensive income	767		423		810			(1,190		)	810
Treasury stock, at cost (401.5 shares)	—		—		(21,805		)	—			(21,805		)
Total shareholders’ equity	20,269		8,357		24,786			(28,616		)	24,796
Total liabilities and shareholders’ equity	$	70,070	$	31,908	$	30,450		$	(28,616	)	$	103,812

(1) The Travelers Companies, Inc., excluding its subsidiaries.

CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)

For the three months ended March 31, 2014

(in millions)	TPC			Other Subsidiaries			Travelers (1)			Eliminations			Consolidated
Cash flows from operating activities
Net income	$	783		$	321		$	1,052		$	(1,104	)	$	1,052
Net adjustments to reconcile net income to net cash provided by operating activities	(90		)	(315		)	(191		)	247			(349		)
Net cash provided by operating activities	693			6			861			(857		)	703

Cash flows from investing activities
Proceeds from maturities of fixed maturities	1,334			977			1			—			2,312
Proceeds from sales of investments:
Fixed maturities	192			214			—			—			406
Equity securities	22			10			4			—			36
Real estate investments	—			1			—			—			1
Other investments	100			67			—			—			167
Purchases of investments:
Fixed maturities	(1,681		)	(1,030		)	(4		)	—			(2,715		)
Equity securities	(1		)	(13		)	(4		)	—			(18		)
Real estate investments	—			(9		)	—			—			(9		)
Other investments	(74		)	(39		)	—			—			(113		)
Net purchases of short-term securities	(73		)	(37		)	(50		)	—			(160		)
Securities transactions in course of settlement	183			56			1			—			240
Acquisition, net of cash acquired	(9		)	(3		)	—			—			(12		)
Other	(58		)	(2		)	—			—			(60		)
Net cash provided by (used in) investing activities	(65		)	192			(52		)	—			75

Cash flows from financing activities
Dividends paid to shareholders	—			—			(176		)	—			(176		)
Issuance of common stock — employee share options	—			—			57			—			57
Treasury stock acquired — share repurchase authorization	—			—			(650		)	—			(650		)
Treasury stock acquired — net employee share-based compensation	—			—			(54		)	—			(54		)
Excess tax benefits from share-based payment arrangements	—			—			13			—			13
Dividends paid to parent company	(625		)	(232		)	—			857			—
Net cash used in financing activities	(625		)	(232		)	(810		)	857			(810		)

Effect of exchange rate changes on cash	(1		)	(1		)	—			—			(2		)
Net increase (decrease) in cash	2			(35		)	(1		)	—			(34		)
Cash at beginning of year	137			154			3			—			294
Cash at end of period	$	139		$	119		$	2		$	—		$	260
Supplemental disclosure of cash flow information
Income taxes paid	$	64		$	15		$	14		$	—		$	93
Interest paid	$	16		$	—		$	18		$	—		$	34

(1) The Travelers Companies, Inc., excluding its subsidiaries.

CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)

For the three months ended March 31, 2013

(in millions)	TPC			Other Subsidiaries			Travelers (1)			Eliminations			Consolidated
Cash flows from operating activities
Net income	$	650		$	293		$	896		$	(943	)	$	896
Net adjustments to reconcile net income to net cash provided by (used in) operating activities	(251		)	(276		)	(965		)	1,126			(366		)
Net cash provided by (used in) operating activities	399			17			(69		)	183			530

Cash flows from investing activities
Proceeds from maturities of fixed maturities	1,345			778			—			—			2,123
Proceeds from sales of investments:
Fixed maturities	170			60			4			—			234
Equity securities	10			26			—			—			36
Other investments	101			73			—			—			174
Purchases of investments:
Fixed maturities	(1,453		)	(886		)	—			—			(2,339		)
Equity securities	(5		)	(8		)	—			—			(13		)
Real estate investments	—			(6		)	—			—			(6		)
Other investments	(62		)	(33		)	—			—			(95		)
Net (purchases) sales of short-term securities	(326		)	(43		)	478			—			109
Securities transactions in course of settlement	95			85			—			—			180
Other	(99		)	(1		)	—			—			(100		)
Net cash provided by (used in) investing activities	(224		)	45			482			—			303

Cash flows from financing activities
Payment of debt	(500		)	—			—			—			(500		)
Dividends paid to shareholders	—			—			(175		)	—			(175		)
Issuance of common stock — employee share options	—			—			98			—			98
Treasury stock acquired — share repurchase authorization	—			—			(300		)	—			(300		)
Treasury stock acquired — net employee share-based compensation	—			—			(58		)	—			(58		)
Excess tax benefits from share-based payment arrangements	—			—			21			—			21
Capital contributions	500			—			—			(500		)	—
Dividends paid to parent company	(217		)	(100		)	—			317			—
Net cash used in financing activities	(217		)	(100		)	(414		)	(183		)	(914		)

Effect of exchange rate changes on cash	—			(6		)	—			—			(6		)
Net decrease in cash	(42		)	(44		)	(1		)	—			(87		)
Cash at beginning of year	177			151			2			—			330
Cash at end of period	$	135		$	107		$	1		$	—		$	243
Supplemental disclosure of cash flow information
Income taxes paid (received)	$	97		$	24		$	(94	)	$	—		$	27
Interest paid	$	28		$	—		$	7		$	—		$	35

(1) The Travelers Companies, Inc., excluding its subsidiaries.