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 June 30, 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 June 30, 2014

(in millions)	TPC		Other Subsidiaries		Travelers (2)			Eliminations			Consolidated
Revenues
Premiums	$	4,020	$	1,908	$	—		$	—		$	5,928
Net investment income	472		221		2			—			695
Fee income	111		1		—			—			112
Net realized investment gains (1)	5		11		—			—			16
Other revenues	32		2		—			—			34

Total revenues	4,640		2,143		2			—			6,785

Claims and expenses
Claims and claim adjustment expenses	2,569		1,257		—			—			3,826
Amortization of deferred acquisition costs	650		315		—			—			965
General and administrative expenses	697		300		4			—			1,001
Interest expense	12		—		80			—			92

Total claims and expenses	3,928		1,872		84			—			5,884

Income (loss) before income taxes	712		271		(82		)	—			901
Income tax expense (benefit)	186		60		(28		)	—			218
Net income of subsidiaries	—		—		737			(737		)	—

Net income	$	526	$	211	$	683		$	(737	)	$	683

(1) Total other-than-temporary impairment (OTTI) for the three months ended June 30, 2014, and the amounts comprising total OTTI that were recognized in net realized investment gains and in other comprehensive income (OCI) were as follows:

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

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

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

CONSOLIDATING STATEMENT OF INCOME (Unaudited)

For the three months ended June 30, 2013

(in millions)	TPC		Other Subsidiaries		Travelers (2)			Eliminations			Consolidated
Revenues
Premiums	$	3,804	$	1,799	$	—		$	—		$	5,603
Net investment income	457		229		1			—			687
Fee income	82		—		—			—			82
Net realized investment gains (1)	124		43		—			—			167
Other revenues	103		32		—			—			135

Total revenues	4,570		2,103		1			—			6,674

Claims and expenses
Claims and claim adjustment expenses	2,339		1,191		—			—			3,530
Amortization of deferred acquisition costs	635		315		—			—			950
General and administrative expenses	639		289		3			—			931
Interest expense	12		—		74			—			86

Total claims and expenses	3,625		1,795		77			—			5,497

Income (loss) before income taxes	945		308		(76		)	—			1,177
Income tax expense (benefit)	203		77		(28		)	—			252
Net income of subsidiaries	—		—		973			(973		)	—

Net income	$	742	$	231	$	925		$	(973	)	$	925

(1) Total other-than-temporary impairment (OTTI) for the three months ended June 30, 2013, and the amounts comprising total OTTI that were recognized in net realized investment gains and in other comprehensive income (OCI) were as follows:

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

Total OTTI gains (losses)	$	(1	)	$	—		$	—	$	—	$	(1	)
OTTI losses recognized in net realized investment gains	$	(1	)	$	(1	)	$	—	$	—	$	(2	)
OTTI gains recognized in OCI	$	—		$	1		$	—	$	—	$	1

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

CONSOLIDATING STATEMENT OF INCOME (Unaudited)

For the six months ended June 30, 2014

(in millions)	TPC		Other Subsidiaries		Travelers (2)			Eliminations			Consolidated
Revenues
Premiums	$	7,964	$	3,787	$	—		$	—		$	11,751
Net investment income	972		456		3			—			1,431
Fee income	218		1		—			—			219
Net realized investment gains (1)	6		9		2			—			17
Other revenues	65		10		—			—			75

Total revenues	9,225		4,263		5			—			13,493

Claims and expenses
Claims and claim adjustment expenses	4,790		2,351		—			—			7,141
Amortization of deferred acquisition costs	1,285		630		—			—			1,915
General and administrative expenses	1,310		565		7			—			1,882
Interest expense	24		—		160			—			184

Total claims and expenses	7,409		3,546		167			—			11,122

Income (loss) before income taxes	1,816		717		(162		)	—			2,371
Income tax expense (benefit)	507		185		(56		)	—			636
Net income of subsidiaries	—		—		1,841			(1,841		)	—

Net income	$	1,309	$	532	$	1,735		$	(1,841	)	$	1,735

(1) Total other-than-temporary impairment (OTTI) for the six months ended June 30, 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 gains	$	(3	)	$	(5	)	$	—	$	—	$	(8	)
OTTI losses recognized in net realized investment gains (losses)	$	(5	)	$	(5	)	$	—	$	—	$	(10	)
OTTI gains recognized in OCI	$	2		$	—		$	—	$	—	$	2

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

CONSOLIDATING STATEMENT OF INCOME (Unaudited)

For the six months ended June 30, 2013

(in millions)	TPC		Other Subsidiaries		Travelers (2)			Eliminations			Consolidated
Revenues
Premiums	$	7,545	$	3,575	$	—		$	—		$	11,120
Net investment income	912		442		3			—			1,357
Fee income	178		1		—			—			179
Net realized investment gains (1)	117		59		1			—			177
Other revenues	132		37		—			—			169

Total revenues	8,884		4,114		4			—			13,002

Claims and expenses
Claims and claim adjustment expenses	4,470		2,213		—			—			6,683
Amortization of deferred acquisition costs	1,272		626		—			—			1,898
General and administrative expenses	1,269		575		2			—			1,846
Interest expense	29		—		149			—			178

Total claims and expenses	7,040		3,414		151			—			10,605

Income (loss) before income taxes	1,844		700		(147		)	—			2,397
Income tax expense (benefit)	452		176		(52		)	—			576
Net income of subsidiaries	—		—		1,916			(1,916		)	—

Net income	$	1,392	$	524	$	1,821		$	(1,916	)	$	1,821

(1) Total other-than-temporary impairment (OTTI) for the six months ended June 30, 2013, and the amounts comprising total OTTI that were recognized in net realized investment gains and in other comprehensive income (OCI) were as follows:

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

Total OTTI gains (losses)	$	(4	)	$	3		$	—	$	—	$	(1	)
OTTI losses recognized in net realized investment gains	$	(5	)	$	(2	)	$	—	$	—	$	(7	)
OTTI gains recognized in OCI	$	1		$	5		$	—	$	—	$	6

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

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the three months ended June 30, 2014

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

Net income	$	526	$	211		$	683	$	(737	)	$	683

Other comprehensive income:
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	359		155			4		—			518
Having credit losses recognized in the consolidated statement of income	2		(1		)	—		—			1
Net changes in benefit plan assets and obligations	—		—			15		—			15
Net changes in unrealized foreign currency translation	51		46			—		—			97
Other comprehensive income before income taxes and other comprehensive income of subsidiaries	412		200			19		—			631
Income tax expense	129		61			6		—			196
Other comprehensive income net of taxes, before other comprehensive income of subsidiaries	283		139			13		—			435
Other comprehensive income of subsidiaries	—		—			422		(422		)	—
Other comprehensive income	283		139			435		(422		)	435
Comprehensive income	$	809	$	350		$	1,118	$	(1,159	)	$	1,118

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

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

For the three months ended June 30, 2013

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

Net income	$	742		$	231		$	925		$	(973	)	$	925

Other comprehensive income (loss):
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	(1,282		)	(509		)	1			—			(1,790		)
Having credit losses recognized in the consolidated statement of income	(2		)	(3		)	—			—			(5		)
Net changes in benefit plan assets and obligations	—			1			25			—			26
Net changes in unrealized foreign currency translation	(51		)	(22		)	—			—			(73		)
Other comprehensive income (loss) before income taxes and other comprehensive loss of subsidiaries	(1,335		)	(533		)	26			—			(1,842		)
Income tax expense (benefit)	(462		)	(183		)	9			—			(636		)
Other comprehensive income (loss), net of taxes, before other comprehensive loss of subsidiaries	(873		)	(350		)	17			—			(1,206		)
Other comprehensive loss of subsidiaries	—			—			(1,223		)	1,223			—
Other comprehensive loss	(873		)	(350		)	(1,206		)	1,223			(1,206		)
Comprehensive loss	$	(131	)	$	(119	)	$	(281	)	$	250		$	(281	)

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

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the six months ended June 30, 2014

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

Net income	$	1,309	$	532		$	1,735	$	(1,841	)	$	1,735

Other comprehensive income:
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	750		301			4		—			1,055
Having credit losses recognized in the consolidated statement of income	9		(6		)	—		—			3
Net changes in benefit plan assets and obligations	—		—			30		—			30
Net changes in unrealized foreign currency translation	26		28			—		—			54
Other comprehensive income before income taxes and other comprehensive income of subsidiaries	785		323			34		—			1,142
Income tax expense	272		106			12		—			390
Other comprehensive income, net of taxes, before other comprehensive income of subsidiaries	513		217			22		—			752
Other comprehensive income of subsidiaries	—		—			730		(730		)	—
Other comprehensive income	513		217			752		(730		)	752
Comprehensive income	$	1,822	$	749		$	2,487	$	(2,571	)	$	2,487

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

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the six months ended June 30, 2013

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

Net income	$	1,392		$	524		$	1,821		$	(1,916	)	$	1,821

Other comprehensive income (loss):
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	(1,597		)	(576		)	7			—			(2,166		)
Having credit losses recognized in the consolidated statement of income	5			(1		)	—			—			4
Net changes in benefit plan assets and obligations	1			3			50			—			54
Net changes in unrealized foreign currency translation	(61		)	(108		)	—			—			(169		)
Other comprehensive income (loss) before income taxes and other comprehensive loss of subsidiaries	(1,652		)	(682		)	57			—			(2,277		)
Income tax expense (benefit)	(570		)	(211		)	20			—			(761		)
Other comprehensive income (loss), net of taxes, before other comprehensive loss of subsidiaries	(1,082		)	(471		)	37			—			(1,516		)
Other comprehensive loss of subsidiaries	—			—			(1,553		)	1,553			—
Other comprehensive loss	(1,082		)	(471		)	(1,516		)	1,553			(1,516		)
Comprehensive income	$	310		$	53		$	305		$	(363	)	$	305

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

CONSOLIDATING BALANCE SHEET (Unaudited)

At June 30, 2014

(in millions)	TPC		Other Subsidiaries		Travelers (1)			Eliminations			Consolidated
Assets
Fixed maturities, available for sale, at fair value (amortized cost $61,841)	$	44,292	$	20,251	$	40		$	—		$	64,583
Equity securities, available for sale, at fair value (cost $648)	302		541		137			—			980
Real estate investments	55		899		—			—			954
Short-term securities	1,516		539		1,763			—			3,818
Other investments	2,607		998		1			—			3,606
Total investments	48,772		23,228		1,941			—			73,941
Cash	167		143		1			—			311
Investment income accrued	483		223		4			—			710
Premiums receivable	4,400		2,189		—			—			6,589
Reinsurance recoverables	6,250		3,258		—			—			9,508
Ceded unearned premiums	637		125		—			—			762
Deferred acquisition costs	1,621		258		—			—			1,879
Contractholder receivables	3,264		1,107		—			—			4,371
Goodwill	2,619		1,015		—			—			3,634
Other intangible assets	234		94		—			—			328
Investment in subsidiaries	—		—		29,105			(29,105		)	—
Other assets	2,180		90		508			—			2,778
Total assets	$	70,627	$	31,730	$	31,559		$	(29,105	)	$	104,811
Liabilities
Claims and claim adjustment expense reserves	$	33,569	$	17,287	$	—		$	—		$	50,856
Unearned premium reserves	8,301		3,788		—			—			12,089
Contractholder payables	3,264		1,107		—			—			4,371
Payables for reinsurance premiums	224		173		—			—			397
Deferred taxes	109		73		57			—			239
Debt	692		—		5,655			—			6,347
Other liabilities	3,899		753		328			—			4,980
Total liabilities	50,058		23,181		6,040			—			79,279
Shareholders’ equity
Common stock (1,750.0 shares authorized; 339.0 shares issued and outstanding)	—		390		21,694			(390		)	21,694
Additional paid-in capital	11,634		6,502		—			(18,136		)	—
Retained earnings	7,655		1,017		25,649			(8,659		)	25,662
Accumulated other comprehensive income	1,280		640		1,562			(1,920		)	1,562
Treasury stock, at cost (419.5 shares)	—		—		(23,386		)	—			(23,386		)
Total shareholders’ equity	20,569		8,549		25,519			(29,105		)	25,532
Total liabilities and shareholders’ equity	$	70,627	$	31,730	$	31,559		$	(29,105	)	$	104,811

(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 six months ended June 30, 2014

(in millions)	TPC			Other Subsidiaries			Travelers (1)			Eliminations			Consolidated
Cash flows from operating activities
Net income	$	1,309		$	532		$	1,735		$	(1,841	)	$	1,735
Net adjustments to reconcile net income to net cash provided by operating activities	(154		)	(317		)	305			(241		)	(407		)
Net cash provided by operating activities	1,155			215			2,040			(2,082		)	1,328

Cash flows from investing activities
Proceeds from maturities of fixed maturities	3,005			1,909			1			—			4,915
Proceeds from sales of investments:
Fixed maturities	415			369			1			—			785
Equity securities	57			34			4			—			95
Real estate investments	—			5			—			—			5
Other investments	196			142			—			—			338
Purchases of investments:
Fixed maturities	(3,399		)	(2,046		)	(4		)	—			(5,449		)
Equity securities	(3		)	(32		)	(5		)	—			(40		)
Real estate investments	(21		)	(15		)	—			—			(36		)
Other investments	(154		)	(72		)	—			—			(226		)
Net sales (purchases) of short-term securities	347			(47		)	(240		)	—			60
Securities transactions in course of settlement	113			91			—			—			204
Acquisitions, net of cash acquired	(9		)	(3		)	—			—			(12		)
Other	(147		)	(5		)	—			—			(152		)
Net cash provided by (used in) investing activities	400			330			(243		)	—			487

Cash flows from financing activities
Dividends paid to shareholders	—			—			(365		)	—			(365		)
Issuance of common stock — employee share options	—			—			122			—			122
Treasury stock acquired — share repurchase authorization	—			—			(1,525		)	—			(1,525		)
Treasury stock acquired — net employee share-based compensation	—			—			(55		)	—			(55		)
Excess tax benefits from share-based payment arrangements	—			—			24			—			24
Dividends paid to parent company	(1,525		)	(557		)	—			2,082			—
Net cash used in financing activities	(1,525		)	(557		)	(1,799		)	2,082			(1,799		)

Effect of exchange rate changes on cash	—			1			—			—			1
Net increase (decrease) in cash	30			(11		)	(2		)	—			17
Cash at beginning of year	137			154			3			—			294
Cash at end of period	$	167		$	143		$	1		$	—		$	311
Supplemental disclosure of cash flow information
Income taxes paid (received)	$	570		$	205		$	(48	)	$	—		$	727
Interest paid	$	24		$	—		$	159		$	—		$	183

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

CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)

For the six months ended June 30, 2013

(in millions)	TPC			Other Subsidiaries			Travelers (1)			Eliminations			Consolidated
Cash flows from operating activities
Net income	$	1,392		$	524		$	1,821		$	(1,916	)	$	1,821
Net adjustments to reconcile net income to net cash provided by operating activities	(807		)	37			(1,148		)	1,349			(569		)
Net cash provided by operating activities	585			561			673			(567		)	1,252

Cash flows from investing activities
Proceeds from maturities of fixed maturities	2,570			1,330			1			—			3,901
Proceeds from sales of investments:
Fixed maturities	300			267			5			—			572
Equity securities	18			32			—			—			50
Other investments	224			157			—			—			381
Purchases of investments:
Fixed maturities	(3,062		)	(1,419		)	(7		)	—			(4,488		)
Equity securities	(15		)	(24		)	(1		)	—			(40		)
Real estate investments	—			(59		)	—			—			(59		)
Other investments	(150		)	(59		)	—			—			(209		)
Net sales (purchases) of short-term securities	(182		)	78			185			—			81
Securities transactions in course of settlement	59			1			—			—			60
Other	(155		)	(2		)	—			—			(157		)
Net cash provided by (used in) investing activities	(393		)	302			183			—			92

Cash flows from financing activities
Payment of debt	(500		)	—			—			—			(500		)
Dividends paid to shareholders	—			—			(366		)	—			(366		)
Issuance of common stock — employee share options	—			—			139			—			139
Treasury stock acquired — share repurchase authorization	—			—			(600		)	—			(600		)
Treasury stock acquired — net employee share-based compensation	—			—			(59		)	—			(59		)
Excess tax benefits from share-based payment arrangements	—			—			29			—			29
Capital contributions	500			—			—			(500		)	—
Dividends paid to parent company	(217		)	(850		)	—			1,067			—
Net cash used in financing activities	(217		)	(850		)	(857		)	567			(1,357		)

Effect of exchange rate changes on cash	—			(9		)	—			—			(9		)
Net increase (decrease) in cash	(25		)	4			(1		)	—			(22		)
Cash at beginning of year	177			151			2			—			330
Cash at end of period	$	152		$	155		$	1		$	—		$	308
Supplemental disclosure of cash flow information
Income taxes paid (received)	$	479		$	178		$	(162	)	$	—		$	495
Interest paid	$	36		$	—		$	148		$	—		$	184

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