14. 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. (excluding its subsidiaries, TRV) has fully and unconditionally guaranteed certain debt obligations of Travelers Property Casualty Corp. (TPC), which totaled $700 million at June 30, 2017.

Prior to the merger of TPC and The St. Paul Companies, Inc. 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, TRV 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, 2017

(in millions)	TPC			Other Subsidiaries		TRV			Eliminations			Consolidated
Revenues
Premiums	$	4,345		$	2,006	$	—		$	—		$	6,351
Net investment income	401			191		6			—			598
Fee income	116			—		—			—			116
Net realized investment gains (losses) (1)	(4		)	25		59			—			80
Other revenues	30			12		—			(3		)	39
Total revenues	4,888			2,234		65			(3		)	7,184
Claims and expenses
Claims and claim adjustment expenses	2,851			1,374		—			—			4,225
Amortization of deferred acquisition costs	693			339		—			—			1,032
General and administrative expenses	737			305		6			(3		)	1,045
Interest expense	12			—		80			—			92
Total claims and expenses	4,293			2,018		86			(3		)	6,394
Income (loss) before income taxes	595			216		(21		)	—			790
Income tax expense (benefit)	157			54		(16		)	—			195
Net income of subsidiaries	—			—		600			(600		)	—
Net income	$	438		$	162	$	595		$	(600	)	$	595

(1) Total other-than-temporary impairment (OTTI) for the three months ended June 30, 2017, 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			TRV		Eliminations		Consolidated
Total OTTI losses	$	(2	)	$	(3	)	$	—	$	—	$	(5	)
OTTI losses recognized in net realized investment gains (losses)	$	(2	)	$	(3	)	$	—	$	—	$	(5	)
OTTI losses recognized in OCI	$	—		$	—		$	—	$	—	$	—

CONSOLIDATING STATEMENT OF INCOME (Unaudited)

For the three months ended June 30, 2016

(in millions)	TPC			Other Subsidiaries		TRV			Eliminations			Consolidated
Revenues
Premiums	$	4,161		$	1,906	$	—		$	—		$	6,067
Net investment income	377			168		4			—			549
Fee income	119			—		—			—			119
Net realized investment gains (losses) (1)	(1		)	20		—			—			19
Other revenues	33			1		—			(3		)	31
Total revenues	4,689			2,095		4			(3		)	6,785
Claims and expenses
Claims and claim adjustment expenses	2,575			1,187		—			—			3,762
Amortization of deferred acquisition costs	666			323		—			—			989
General and administrative expenses	743			313		1			(3		)	1,054
Interest expense	12			—		81			—			93
Total claims and expenses	3,996			1,823		82			(3		)	5,898
Income (loss) before income taxes	693			272		(78		)	—			887
Income tax expense (benefit)	191			69		(37		)	—			223
Net income of subsidiaries	—			—		705			(705		)	—
Net income	$	502		$	203	$	664		$	(705	)	$	664

(1) Total other-than-temporary impairment (OTTI) for the three months ended June 30, 2016, 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			TRV		Eliminations		Consolidated
Total OTTI losses	$	(3	)	$	(1	)	$	—	$	—	$	(4	)
OTTI losses recognized in net realized investment gains (losses)	$	(3	)	$	(1	)	$	—	$	—	$	(4	)
OTTI gains (losses) recognized in OCI	$	—		$	—		$	—	$	—	$	—

CONSOLIDATING STATEMENT OF INCOME (Unaudited)

For the six months ended June 30, 2017

(in millions)	TPC			Other Subsidiaries		TRV			Eliminations			Consolidated
Revenues
Premiums	$	8,573		$	3,961	$	—		$	—		$	12,534
Net investment income	813			385		10			—			1,208
Fee income	229			—		—			—			229
Net realized investment gains (losses) (1)	(8		)	34		59			—			85
Other revenues	54			21		—			(5		)	70
Total revenues	9,661			4,401		69			(5		)	14,126
Claims and expenses
Claims and claim adjustment expenses	5,603			2,716		—			—			8,319
Amortization of deferred acquisition costs	1,361			674		—			—			2,035
General and administrative expenses	1,440			597		9			(5		)	2,041
Interest expense	24			—		157			—			181
Total claims and expenses	8,428			3,987		166			(5		)	12,576
Income (loss) before income taxes	1,233			414		(97		)	—			1,550
Income tax expense (benefit)	287			108		(57		)	—			338
Net income of subsidiaries	—			—		1,252			(1,252		)	—
Net income	$	946		$	306	$	1,212		$	(1,252	)	$	1,212

(1) Total other-than-temporary impairment (OTTI) for the six months ended June 30, 2017, 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			TRV		Eliminations		Consolidated
Total OTTI losses	$	(2	)	$	(4	)	$	—	$	—	$	(6	)
OTTI losses recognized in net realized investment gains (losses)	$	(3	)	$	(4	)	$	—	$	—	$	(7	)
OTTI gains recognized in OCI	$	1		$	—		$	—	$	—	$	1

CONSOLIDATING STATEMENT OF INCOME (Unaudited)

For the six months ended June 30, 2016

(in millions)	TPC			Other Subsidiaries		TRV			Eliminations			Consolidated
Revenues
Premiums	$	8,246		$	3,802	$	—		$	—		$	12,048
Net investment income	753			334		6			—			1,093
Fee income	236			—		—			—			236
Net realized investment gains (losses) (1)	(17		)	27		—			—			10
Other revenues	81			17		—			(14		)	84
Total revenues	9,299			4,180		6			(14		)	13,471
Claims and expenses
Claims and claim adjustment expenses	5,095			2,379		—			—			7,474
Amortization of deferred acquisition costs	1,316			644		—			—			1,960
General and administrative expenses	1,447			611		5			(14		)	2,049
Interest expense	24			—		160			—			184
Total claims and expenses	7,882			3,634		165			(14		)	11,667
Income (loss) before income taxes	1,417			546		(159		)	—			1,804
Income tax expense (benefit)	390			138		(79		)	—			449
Net income of subsidiaries	—			—		1,435			(1,435		)	—
Net income	$	1,027		$	408	$	1,355		$	(1,435	)	$	1,355

(1) Total other-than-temporary impairment (OTTI) for the six months ended June 30, 2016, 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			TRV		Eliminations		Consolidated
Total OTTI losses	$	(17	)	$	(15	)	$	—	$	—	$	(32	)
OTTI losses recognized in net realized investment gains (losses)	$	(12	)	$	(10	)	$	—	$	—	$	(22	)
OTTI losses recognized in OCI	$	(5	)	$	(5	)	$	—	$	—	$	(10	)

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the three months ended June 30, 2017

(in millions)	TPC		Other Subsidiaries			TRV			Eliminations			Consolidated

Net income	$	438	$	162		$	595		$	(600	)	$	595

Other comprehensive income (loss):
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	296		85			(54		)	—			327
Having credit losses recognized in the consolidated statement of income	1		1			—			—			2
Net changes in benefit plan assets and obligations	—		(1		)	18			—			17
Net changes in unrealized foreign currency translation	14		34			—			—			48
Other comprehensive income (loss) before income taxes and other comprehensive income of subsidiaries	311		119			(36		)	—			394
Income tax expense (benefit)	102		33			(12		)	—			123
Other comprehensive income (loss), net of taxes, before other comprehensive income of subsidiaries	209		86			(24		)	—			271
Other comprehensive income of subsidiaries	—		—			295			(295		)	—
Other comprehensive income	209		86			271			(295		)	271
Comprehensive income	$	647	$	248		$	866		$	(895	)	$	866

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the three months ended June 30, 2016

(in millions)	TPC		Other Subsidiaries			TRV			Eliminations			Consolidated

Net income	$	502	$	203		$	664		$	(705	)	$	664

Other comprehensive income (loss):
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	570		306			3			—			879
Having credit losses recognized in the consolidated statement of income	6		6			—			—			12
Net changes in benefit plan assets and obligations	18		19			(19		)	—			18
Net changes in unrealized foreign currency translation	25		(60		)	—			—			(35		)
Other comprehensive income (loss) before income taxes and other comprehensive income of subsidiaries	619		271			(16		)	—			874
Income tax expense (benefit)	216		113			(6		)	—			323
Other comprehensive income (loss), net of taxes, before other comprehensive income of subsidiaries	403		158			(10		)	—			551
Other comprehensive income of subsidiaries	—		—			561			(561		)	—
Other comprehensive income	403		158			551			(561		)	551
Comprehensive income	$	905	$	361		$	1,215		$	(1,266	)	$	1,215

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the six months ended June 30, 2017

(in millions)	TPC		Other Subsidiaries			TRV			Eliminations			Consolidated

Net income	$	946	$	306		$	1,212		$	(1,252	)	$	1,212

Other comprehensive income (loss):
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	389		129			(47		)	—			471
Having credit losses recognized in the consolidated statement of income	2		—			—			—			2
Net changes in benefit plan assets and obligations	—		(1		)	35			—			34
Net changes in unrealized foreign currency translation	39		50			—			—			89
Other comprehensive income (loss) before income taxes and other comprehensive income of subsidiaries	430		178			(12		)	—			596
Income tax expense (benefit)	139		49			(3		)	—			185
Other comprehensive income (loss), net of taxes, before other comprehensive income of subsidiaries	291		129			(9		)	—			411
Other comprehensive income of subsidiaries	—		—			420			(420		)	—
Other comprehensive income	291		129			411			(420		)	411
Comprehensive income	$	1,237	$	435		$	1,623		$	(1,672	)	$	1,623

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the six months ended June 30, 2016

(in millions)	TPC		Other Subsidiaries			TRV			Eliminations			Consolidated

Net income	$	1,027	$	408		$	1,355		$	(1,435	)	$	1,355

Other comprehensive income (loss):
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income	1,055		534			4			—			1,593
Having credit losses recognized in the consolidated statement of income	8		9			—			—			17
Net changes in benefit plan assets and obligations	18		20			(4		)	—			34
Net changes in unrealized foreign currency translation	119		(51		)	—			—			68
Other comprehensive income before income taxes and other comprehensive income of subsidiaries	1,200		512			—			—			1,712
Income tax expense	397		192			1			—			590
Other comprehensive income (loss), net of taxes, before other comprehensive income of subsidiaries	803		320			(1		)	—			1,122
Other comprehensive income of subsidiaries	—		—			1,123			(1,123		)	—
Other comprehensive income	803		320			1,122			(1,123		)	1,122
Comprehensive income	$	1,830	$	728		$	2,477		$	(2,558	)	$	2,477

CONSOLIDATING BALANCE SHEET (Unaudited)

At June 30, 2017

(in millions)	TPC			Other Subsidiaries			TRV			Eliminations			Consolidated

Assets
Fixed maturities, available for sale, at fair value (amortized cost $60,482)	$	43,029		$	18,829		$	49		$	—		$	61,907
Equity securities, available for sale, at fair value (cost $558)	176			357			167			—			700
Real estate investments	55			865			—			—			920
Short-term securities	2,065			715			2,512			—			5,292
Other investments	2,612			899			1			—			3,512
Total investments	47,937			21,665			2,729			—			72,331
Cash	134			192			2			—			328
Investment income accrued	422			176			4			—			602
Premiums receivable	4,952			2,393			—			—			7,345
Reinsurance recoverables	5,594			2,556			—			—			8,150
Ceded unearned premiums	587			78			—			—			665
Deferred acquisition costs	1,847			204			—			—			2,051
Deferred taxes	(43		)	188			56			—			201
Contractholder receivables	3,759			941			—			—			4,700
Goodwill	2,586			1,003			—			—			3,589
Other intangible assets	202			62			—			—			264
Investment in subsidiaries	—			—			27,451			(27,451		)	—
Other assets	2,122			283			38			—			2,443
Total assets	$	70,099		$	29,741		$	30,280		$	(27,451	)	$	102,669
Liabilities
Claims and claim adjustment expense reserves	$	32,564		$	16,010		$	—		$	—		$	48,574
Unearned premium reserves	9,043			4,009			—			—			13,052
Contractholder payables	3,759			941			—			—			4,700
Payables for reinsurance premiums	214			150			—			—			364
Debt	693			—			6,227			—			6,920
Other liabilities	3,956			1,040			205			—			5,201
Total liabilities	50,229			22,150			6,432			—			78,811
Shareholders’ equity
Common stock (1,750.0 shares authorized; 275.9 shares issued and outstanding)	—			390			22,781			(390		)	22,781
Additional paid-in capital	11,634			6,499			—			(18,133		)	—
Retained earnings	7,917			706			33,006			(8,613		)	33,016
Accumulated other comprehensive income (loss)	319			(4		)	(344		)	(315		)	(344		)
Treasury stock, at cost (495.7 shares)	—			—			(31,595		)	—			(31,595		)
Total shareholders’ equity	19,870			7,591			23,848			(27,451		)	23,858
Total liabilities and shareholders’ equity	$	70,099		$	29,741		$	30,280		$	(27,451	)	$	102,669

CONSOLIDATING BALANCE SHEET (Unaudited)

At December 31, 2016

(in millions)	TPC		Other Subsidiaries			TRV			Eliminations			Consolidated

Assets
Fixed maturities, available for sale, at fair value (amortized cost $59,650)	$	42,014	$	18,452		$	49		$	—		$	60,515
Equity securities, available for sale, at fair value (cost $504)	169		408			155			—			732
Real estate investments	56		872			—			—			928
Short-term securities	2,447		791			1,627			—			4,865
Other investments	2,569		878			1			—			3,448
Total investments	47,255		21,401			1,832			—			70,488
Cash	141		164			2			—			307
Investment income accrued	441		183			6			—			630
Premiums receivable	4,545		2,177			—			—			6,722
Reinsurance recoverables	5,664		2,623			—			—			8,287
Ceded unearned premiums	536		53			—			—			589
Deferred acquisition costs	1,741		182			—			—			1,923
Deferred taxes	216		224			25			—			465
Contractholder receivables	3,656		953			—			—			4,609
Goodwill	2,578		1,002			—			—			3,580
Other intangible assets	202		66			—			—			268
Investment in subsidiaries	—		—			27,137			(27,137		)	—
Other assets	1,973		370			34			—			2,377
Total assets	$	68,948	$	29,398		$	29,036		$	(27,137	)	$	100,245
Liabilities
Claims and claim adjustment expense reserves	$	32,168	$	15,781		$	—		$	—		$	47,949
Unearned premium reserves	8,575		3,754			—			—			12,329
Contractholder payables	3,656		953			—			—			4,609
Payables for reinsurance premiums	156		117			—			—			273
Debt	693		—			5,744			—			6,437
Other liabilities	4,106		1,239			82			—			5,427
Total liabilities	49,354		21,844			5,826			—			77,024
Shareholders’ equity
Common stock (1,750.0 shares authorized; 279.6 shares issued and outstanding)	—		390			22,614			(390		)	22,614
Additional paid-in capital	11,634		6,499			—			(18,133		)	—
Retained earnings	7,933		797			32,185			(8,719		)	32,196
Accumulated other comprehensive income (loss)	27		(132		)	(755		)	105			(755		)
Treasury stock, at cost (489.5 shares)	—		—			(30,834		)	—			(30,834		)
Total shareholders’ equity	19,594		7,554			23,210			(27,137		)	23,221
Total liabilities and shareholders’ equity	$	68,948	$	29,398		$	29,036		$	(27,137	)	$	100,245

CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)

For the six months ended June 30, 2017

(in millions)	TPC			Other Subsidiaries			TRV			Eliminations			Consolidated

Cash flows from operating activities
Net income	$	946		$	306		$	1,212		$	(1,252	)	$	1,212
Net adjustments to reconcile net income to net cash provided by operating activities	224			31			223			(105		)	373
Net cash provided by operating activities	1,170			337			1,435			(1,357		)	1,585
Cash flows from investing activities
Proceeds from maturities of fixed maturities	3,211			1,087			2			—			4,300
Proceeds from sales of investments:
Fixed maturities	285			278			—			—			563
Equity securities	4			75			121			—			200
Real estate investments	—			20			—			—			20
Other investments	294			109			—			—			403
Purchases of investments:
Fixed maturities	(4,160		)	(1,511		)	(2		)	—			(5,673		)
Equity securities	(3		)	(41		)	(122		)	—			(166		)
Real estate investments	—			(26		)	—			—			(26		)
Other investments	(202		)	(57		)	—			—			(259		)
Net sales (purchases) of short-term securities	383			78			(885		)	—			(424		)
Securities transactions in course of settlement	105			64			1			—			170
Other	(135		)	6			—			—			(129		)
Net cash provided by (used in) investing activities	(218		)	82			(885		)	—			(1,021		)
Cash flows from financing activities
Treasury stock acquired — share repurchase authorization	—			—			(700		)	—			(700		)
Treasury stock acquired — net employee share-based compensation	—			—			(61		)	—			(61		)
Dividends paid to shareholders	—			—			(389		)	—			(389		)
Payment of debt	—			—			(207		)	—			(207		)
Issuance of debt	—			—			689			—			689
Issuance of common stock — employee share options	—			—			118			—			118
Dividends paid to parent company	(961		)	(396		)	—			1,357			—
Net cash used in financing activities	(961		)	(396		)	(550		)	1,357			(550		)
Effect of exchange rate changes on cash	2			5			—			—			7
Net increase (decrease) in cash	(7		)	28			—			—			21
Cash at beginning of year	141			164			2			—			307
Cash at end of period	$	134		$	192		$	2		$	—		$	328
Supplemental disclosure of cash flow information
Income taxes paid (received)	$	336		$	119		$	(132	)	$	—		$	323
Interest paid	$	24		$	—		$	154		$	—		$	178

CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)

For the six months ended June 30, 2016

(in millions)	TPC			Other Subsidiaries			TRV			Eliminations			Consolidated

Cash flows from operating activities
Net income	$	1,027		$	408		$	1,355		$	(1,435	)	$	1,355
Net adjustments to reconcile net income to net cash provided by (used in) operating activities	(17		)	(222		)	116			61			(62		)
Net cash provided by operating activities	1,010			186			1,471			(1,374		)	1,293
Cash flows from investing activities
Proceeds from maturities of fixed maturities	2,728			1,040			5			—			3,773
Proceeds from sales of investments:
Fixed maturities	385			352			2			—			739
Equity securities	10			28			—			—			38
Real estate investments	—			69			—			—			69
Other investments	233			110			—			—			343
Purchases of investments:
Fixed maturities	(3,588		)	(2,108		)	(9		)	—			(5,705		)
Equity securities	(5		)	(19		)	(2		)	—			(26		)
Real estate investments	—			(20		)	—			—			(20		)
Other investments	(221		)	(69		)	—			—			(290		)
Net (purchases) sales of short-term securities	193			639			(151		)	—			681
Securities transactions in course of settlement	325			137			(1		)	—			461
Other	(151		)	(3		)	—			—			(154		)
Net cash provided by (used in) investing activities	(91		)	156			(156		)	—			(91		)
Cash flows from financing activities
Treasury stock acquired — share repurchase authorization	—			—			(1,100		)	—			(1,100		)
Treasury stock acquired — net employee share-based compensation	—			—			(59		)	—			(59		)
Dividends paid to shareholders	—			—			(375		)	—			(375		)
Payment of debt	—			—			(400		)	—			(400		)
Issuance of debt	—			—			491			—			491
Issuance of common stock — employee share options	—			—			129			—			129
Dividends paid to parent company	(1,025		)	(349		)	—			1,374			—
Net cash used in financing activities	(1,025		)	(349		)	(1,314		)	1,374			(1,314		)
Effect of exchange rate changes on cash	2			(5		)	—			—			(3		)
Net increase (decrease) in cash	(104		)	(12		)	1			—			(115		)
Cash at beginning of year	225			153			2			—			380
Cash at end of period	$	121		$	141		$	3		$	—		$	265
Supplemental disclosure of cash flow information
Income taxes paid (received)	$	398		$	142		$	(73	)	$	—		$	467
Interest paid	$	24		$	—		$	156		$	—		$	180