<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- ----- THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- ----- THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
----------- ----------
COMMISSION FILE NUMBER 1-14328
TRAVELERS PROPERTY CASUALTY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-1445591
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
(Address of principal executive offices) (Zip Code)
(860) 277-0111
(Registrant's telephone number, including area code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK AS OF THE LATEST PRACTICABLE DATE:
COMMON STOCK OUTSTANDING AS OF APRIL 30, 1997:
<TABLE>
<S> <C>
CLASS A 71,893,586
CLASS B 328,020,170
</TABLE>
<PAGE> 2
TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements: Page No.
Condensed Consolidated Statement of Income (Unaudited) -
Three Months Ended March 31, 1997 and 1996 3
Condensed Consolidated Balance Sheet -
March 31, 1997 (Unaudited) and December 31, 1996 4
Condensed Consolidated Statement of Changes in Stockholders'
Equity (Unaudited) - Three Months Ended March 31, 1997 5
Condensed Consolidated Statement of Cash Flows (Unaudited) -
Three Months Ended March 31, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II - Other Information
Item 1. Legal Proceedings 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 22
Exhibit Index 23
Signatures 24
2
<PAGE> 3
TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1997 1996
------ ------
<S> <C> <C>
REVENUES
Premiums $1,800 $ 826
Net investment income 500 196
Fee income 97 93
Realized investment gains 8 26
Other revenues 26 11
------ ------
Total revenues 2,431 1,152
------ ------
CLAIMS AND EXPENSES
Claims and claim adjustment expenses 1,373 730
Amortization of deferred acquisition costs 283 123
Interest expense 40 --
General and administrative expenses 345 174
------ ------
Total claims and expenses 2,041 1,027
------ ------
Income before federal income taxes 390 125
Federal income taxes 117 27
------ ------
Net income $ 273 $ 98
====== ======
Net income per share of common stock
and common stock equivalents $ 0.68 $ 0.33
====== ======
Weighted average number of common shares
outstanding and common stock equivalents 399.3 294.5
====== ======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions, except shares)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value (cost, $24,184 and $24,052) $ 24,065 $ 24,446
Equity securities, at fair value (cost, $930 and $756) 938 779
Mortgage loans 935 1,005
Real estate held for sale 215 157
Short-term securities 2,854 2,311
Other investments 432 666
-------- --------
Total investments 29,439 29,364
-------- --------
Cash 106 106
Investment income accrued 371 381
Premium balances receivable 3,171 2,976
Reinsurance recoverables 9,798 9,714
Deferred acquisition costs 464 426
Deferred federal income taxes 1,786 1,583
Contractholder receivables 1,880 1,828
Goodwill 1,527 1,549
Other assets 2,014 1,852
-------- --------
Total assets $ 50,556 $ 49,779
======== ========
LIABILITIES
Claims and claim adjustment expense reserves $ 31,287 $ 31,177
Unearned premium reserves 3,803 3,554
Contractholder payables 1,880 1,828
Commercial paper -- 25
Long-term debt 1,249 1,249
Other liabilities 5,090 4,566
-------- --------
Total liabilities 43,309 42,399
-------- --------
TAP - obligated mandatorily redeemable preferred securities of subsidiary trusts
holding solely junior subordinated debt securities of TAP 900 900
STOCKHOLDERS' EQUITY
Common stock:
Class A, $.01 par value, 700 million shares authorized;
(issued shares, 72,393,407 and 71,979,829) 1 1
Class B, $.01 par value, 700 million shares authorized,
328,020,170 shares issued and outstanding 3 3
Additional paid-in capital 5,473 5,455
Retained earnings 992 749
Treasury stock, at cost (shares, 343,000 and 406,860) (12) (13)
Unrealized gain (loss) on investment securities, net of tax (77) 285
Unearned compensation (33) --
-------- --------
Total stockholders' equity 6,347 6,480
-------- --------
Total liabilities and stockholders' equity $ 50,556 $ 49,779
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
(in millions, except shares)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1997
---------------------------------
Amount Shares
--------- --------------------------------
COMMON STOCK AND ADDITIONAL
PAID-IN CAPITAL Class A Class B
-------------- ---------------
<S> <C> <C> <C>
Balance, beginning of period $ 5,459 71,979,829 328,020,170
Capital Accumulation Plan grant 18 413,578 -
--------- -------------- ---------------
Balance, end of period 5,477 72,393,407 328,020,170
--------- -------------- ---------------
RETAINED EARNINGS
Balance, beginning of period 749
Net income 273
Dividends (30)
---------
Balance, end of period 992
---------
TREASURY STOCK (at cost)
Balance, beginning of period (13) (406,860)
Capital Accumulation Plan grant 17 502,430
Treasury stock acquired (16) (438,570)
--------- --------------
Balance, end of period (12) (343,000)
--------- --------------
UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, NET OF TAX
Balance, beginning of period 285
Net change in unrealized gains and losses
on investment securities, net of tax (362)
---------
Balance, end of period (77)
---------
UNEARNED COMPENSATION
Balance, beginning of period -
Net issuance of restricted stock under Capital
Accumulation Plan (35)
Restricted stock amortization 2
---------
Balance, end of period (33)
---------
Total stockholders' equity and shares outstanding $ 6,347 72,050,407 328,020,170
========= ============== ===============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(in millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1997 1996
------- -------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 256 $ (89)
------- -------
Cash flows from investing activities:
Proceeds from maturities of investments
Fixed maturities 419 221
Mortgage loans 46 1
Proceeds from sales of investments
Fixed maturities 3,968 1,215
Equity securities 152 117
Mortgage loans 27 17
Real estate held for sale 3 2
Purchases of investments
Fixed maturities (4,540) (1,303)
Equity securities (148) (154)
Short-term securities, (purchases) sales, net (539) (25)
Other investments, net 40 (4)
Securities transactions in course of settlement 387 7
------- -------
Net cash provided by (used in) investing activities (185) 94
------- -------
Cash flows from financing activities:
Issuance of commercial paper, net (25) --
Contribution from TIGI -- 1
Purchase of treasury stock (16) --
Dividend to TIGI (25) --
Dividends to minority shareholders (5) --
------- -------
Net cash provided by (used in) financing activities (71) 1
------- -------
Net increase in cash -- 6
Cash at beginning of period 106 51
------- -------
Cash at end of period $ 106 $ 57
------- -------
Supplemental disclosure of cash flow information:
Income taxes paid $ 169 $ 48
------- -------
Interest paid $ 25 $ --
------- -------
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. General
The interim condensed consolidated financial statements include the
accounts of Travelers Property Casualty Corp. (TAP) (a direct
majority-owned subsidiary of The Travelers Insurance Group Inc. (TIGI) and
an indirect majority-owned subsidiary of Travelers Group Inc.) and its
subsidiaries (collectively, the Company), are prepared in conformity with
generally accepted accounting principles (GAAP) and are unaudited. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments necessary for a fair presentation, have been reflected. The
accompanying condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report to Stockholders for the year ended
December 31, 1996.
On April 2, 1996, TAP purchased from Aetna Services Inc. all of the
outstanding capital stock of The Aetna Casualty and Surety Company and The
Standard Fire Insurance Company (collectively, Aetna P&C) for approximately
$4.2 billion in cash. The acquisition was accounted for under the purchase
method of accounting and, accordingly, the condensed consolidated financial
statements include the results of Aetna P&C's operations only from the date
of acquisition.
Prior to January 1, 1997, Aetna P&C recorded certain written premiums
within Commercial Lines when the premiums were billed. The Company
conformed the Aetna P&C method to the method employed by The Travelers
Indemnity Company and its subsidiaries (Travelers P&C). The Travelers P&C
method is to record written premiums when the policies are written. The
effect of this change on the condensed consolidated financial statements
was not significant.
Certain financial information that is normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles, but that is not required for interim reporting purposes, has
been condensed or omitted. Certain prior year amounts have been
reclassified to conform with the 1997 presentation.
2. Aetna P&C Acquisition - Pro Forma Results of Operations
The following unaudited pro forma information presents the results of
operations of the Company and Aetna P&C for the three months ended March
31, 1996, with pro forma adjustments as if the acquisition and transactions
related to the funding of the acquisition had been consummated as of the
beginning of the period presented. This pro forma information is not
necessarily indicative of what would have occurred had the acquisition and
related transactions been made on the date indicated, or of future results
of the Company.
<TABLE>
<CAPTION>
Three Months Ended
(in millions, except per share data) March 31, 1996 *
------------------
<S> <C>
Revenues $2,760
Net income 291
Net income per share of common stock 0.73
</TABLE>
* Historical results of Aetna P&C for the first quarter of 1996 include
$307 million ($200 million after tax) of realized investment gains.
7
<PAGE> 8
TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
3. Changes in Accounting Principles and Accounting Standards not yet Adopted
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (FAS 125). This
statement establishes accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. These
standards are based on an approach that focuses on control. Under this
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered
and derecognizes liabilities when extinguished. FAS 125 provides standards
for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. The requirements of FAS 125 are
effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and are
to be applied prospectively. However, in December 1996, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125," which delays until January 1, 1998 the effective
date for certain provisions. Earlier or retroactive application is not
permitted. The adoption of the provisions of this statement effective
January 1, 1997 did not have a material impact on results of operations,
financial condition or liquidity, and the Company is currently evaluating
the impact of the provisions whose effective date has been delayed until
January 1, 1998.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (FAS 128). FAS 128 establishes
standards for computing and presenting earnings per share (EPS) and applies
to entities with publicly held common stock. FAS 128 simplifies the
standards for computing earnings per share previously found in Accounting
Principles Board Opinion No. 15, "Earnings per Share" (Opinion 15) and
makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised.
FAS 128 supersedes Opinion 15 and related accounting interpretations and is
effective for financial statements issued for periods ending after December
15, 1997, including interim periods; earlier application is not permitted.
However, an entity is permitted to disclose pro forma amounts computed
using FAS 128 in the notes to the financial statements in periods prior to
required adoption.
On a pro forma basis for the three months ended March 31, 1997 and 1996,
basic and diluted EPS are equal to primary and fully diluted EPS,
respectively.
8
<PAGE> 9
TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
4. Earnings Per Share
Earnings per common share is based on the weighted average number of common
shares outstanding during the period. For purposes of the computation of
earnings per share for the quarter ended March 31, 1996, the weighted
average number of shares was computed by treating the common stock issued
within a one-year period prior to the initial filing of the registration
statement relating to the initial public offering (IPO) as outstanding for
all reported periods. This amount was then reduced by the dilutive effect
of such issuances of stock prior to the IPO determined by using the actual
proceeds and the number of shares that could have been repurchased using
the IPO price as the repurchase price for all periods presented.
5. Capital and Debt
TAP has a five-year revolving credit facility in the amount of $500 million
with a syndicate of banks that expires in December, 2001. None of this
facility is currently utilized. Under this facility TAP is required to
maintain a certain level of consolidated stockholders' equity (as defined
in the agreement). At March 31, 1997, this requirement was exceeded by
approximately $3.0 billion. In addition, this facility places restrictions
on the amount of consolidated debt TAP can incur. TAP also issues
commercial paper directly to investors and maintains unused credit
availability under the revolving credit facility at least equal to the
amount of commercial paper outstanding. At March 31, 1997, TAP had no
commercial paper outstanding. TAP also currently has available a $200
million line of credit for working capital and other general corporate
purposes from a subsidiary of Travelers Group Inc. The lender has no
obligation to make any loan to TAP under this line of credit.
The Company'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. Dividend payments to TAP from its insurance subsidiaries are
limited to $647 million in 1997 without prior approval of the Connecticut
Insurance Department. TAP has received $80 million of dividends from its
insurance subsidiaries during the first three months of 1997.
On January 22, 1997, the Company, through its Capital Accumulation Plan
(the Plan), issued 414 thousand shares of the Company's Class A Common
Stock and reissued 502 thousand shares of treasury stock in the form of
restricted stock to participating officers and other key employees. The
restricted stock generally vests after a three-year period. Except under
limited circumstances, the stock cannot 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 restricted stock grants represents the market value of
the Company's common stock at the date of grant and is recognized as a
charge to income ratably over the vesting period.
6. Commitments and Contingencies
In 1996, Lloyd's of London (Lloyd's) restructured its operations with
respect to claims for years prior to 1993. The Company is in arbitration
with underwriters at Lloyd's in New York State to enforce reinsurance
contracts with respect to recoveries for certain asbestos claims. The
dispute involves the ability of the Company to aggregate asbestos claims
under a market agreement between Lloyd's and the Company or under the
applicable reinsurance treaties.
9
<PAGE> 10
TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
6. Commitments and Contingencies, Continued
The outcome of the arbitration referred to above is uncertain and the
impact, if any, on collectibility of amounts recoverable by the Company
from Lloyd's cannot be quantified at this time. The Company believes that
it is possible that an unfavorable resolution of this matter could have a
material adverse effect on the Company's results of operations in a future
period. However, the Company believes that 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. Including this
allowance, the Company believes that the net receivable from reinsurance
contracts is properly stated.
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. Conventional actuarial techniques are
not used to estimate such reserves.
The reserves carried for environmental and asbestos claims at March 31,
1997 are the Company's best estimate of ultimate claims and claim
adjustment expenses based upon known facts and current law. However, the
conditions surrounding the final resolution of these claims continue to
change. Currently, it is 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 and changes in legislation.
Because of these future unknowns, additional liabilities may
arise for amounts in excess of the current reserves. These additional
amounts, or a range of these additional amounts, cannot now be reasonably
estimated, and could result in a liability exceeding reserves by an amount
that would be material to the Company's operating results in a future
period. However, the Company believes that it is not likely that these
claims will have a material adverse effect on the Company's financial
condition or liquidity.
In the ordinary course of business, the Company is a defendant or
codefendant in various litigation matters other than those described above.
Although there can be no assurances, the Company believes, based on
information currently available, that the ultimate resolution of these
legal proceedings would not be likely to have a material adverse effect on
its results of operations, financial condition or liquidity.
10
<PAGE> 11
TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Results of Operations reflect the consolidated results of operations of
Travelers Property Casualty Corp. (TAP) and its subsidiaries (the Company).
On April 2, 1996, TAP purchased from Aetna Services Inc. (Aetna) all of the
outstanding capital stock of The Aetna Casualty and Surety Company and The
Standard Fire Insurance Company (collectively, Aetna P&C) for approximately $4.2
billion in cash. The acquisition was accounted for under the purchase method of
accounting and, accordingly, the condensed consolidated financial statements
include the results of Aetna P&C's operations only from the date of acquisition.
The Company provides a wide range of commercial and personal property and
casualty insurance products and services to businesses, associations and
individuals throughout the United States.
CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
1996
<TABLE>
<CAPTION>
(in millions, except per share data) Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
--------- ---------
<S> <C> <C>
Revenues $ 2,431 $ 1,152
========= =========
Net income $ 273 $ 98
========= =========
EARNINGS PER SHARE:
Net income $ 0.68 $ 0.33
========= =========
Weighted average number of common
shares outstanding and common stock equivalents 399.3 294.5
--------- ---------
</TABLE>
Consolidated Results of Operations for the Three Months Ended March 31, 1997 and
1996
Net income for the first quarter of 1997 was $273 million, or $0.68 per share,
compared to net income of $98 million, or $0.33 per share, in the first quarter
of 1996. The increase in net income was primarily due to the post-acquisition
results of operations of Aetna P&C, as well as expense-reduction initiatives
associated with the integration of the two companies. In addition, the increase
in net income reflects favorable loss experience in personal auto lines, higher
net investment income and lower catastrophe losses.
Revenues of $2.431 billion in the first quarter of 1997 increased $1.279 billion
from the first quarter of 1996 revenues of $1.152 billion. This increase was
primarily attributable to a $974 million increase in earned premiums and a $304
million increase in net investment income. The earned premium and net investment
income increases are primarily the result of the acquisition of Aetna P&C.
Commercial Lines earned premiums increased $593 million to $1.090 billion in the
first quarter of 1997 from $497 million in the first quarter of 1996. The
increase in Commercial Lines earned premiums is net of continued declines
resulting from the Company's selective renewal activity in response to the
competitive pricing environment. Personal Lines earned premiums for the first
quarter of 1997 of $710 million increased $384 million from $326 million in the
first quarter of 1996.
Net investment income was $500 million for the first quarter of 1997, an
increase of $304 million from the first quarter of 1996, primarily due to the
acquisition of Aetna P&C. Realized investment gains of $8 million decreased by
$18 million in the first quarter of 1997 from $26 million in the first quarter
of 1996.
11
<PAGE> 12
National Accounts within Commercial Lines is the primary source of fee income
due to its service business. Fee income for the first quarter of 1997 was $97
million, a $4 million increase from the first quarter of 1996. This increase was
the result of the acquisition of Aetna P&C, mostly offset by the depopulation of
involuntary pools as the loss experience of workers' compensation improved and
insureds moved to voluntary markets, the Company's selective renewal activity to
address the competitive pricing environment and its continued success in
lowering workers' compensation losses of customers.
Claims and expenses of $2.041 billion for the first quarter of 1997 increased
$1.014 billion from the first quarter of 1996. The increase was primarily
attributable to the claims and expenses related to the newly acquired Aetna P&C
business and financing costs associated with the acquisition of Aetna P&C,
partially offset by expense reductions.
The Company's effective tax rate was 30% for the first quarter of 1997 and 22%
for the first quarter of 1996. These rates were lower than the statutory tax
rate in both periods primarily due to municipal bond interest not being taxed
for federal income tax purposes. The 1997 first quarter effective tax rate was
higher than the 1996 first quarter effective tax rate primarily due to a
proportionately smaller amount of tax exempt income.
The overall statutory and GAAP combined ratios were as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Statutory:
Loss and loss adjustment expense (LAE) ratio... 73.7% 82.9%
Underwriting expense ratio .................... 28.0 27.0
Combined ratio before policyholder dividends... 101.7 109.9
Combined ratio ................................ 101.9 110.1
GAAP:
Loss and LAE ratio ............................ 73.0% 82.4%
Underwriting expense ratio .................... 27.0 25.9
Combined ratio before policyholder dividends... 100.0 108.3
Combined ratio ................................ 100.4 108.5
</TABLE>
Beginning in 1997, for purposes of computing GAAP combined ratios, fee income is
now allocated as a reduction of losses and loss adjustment expenses and other
underwriting expenses. Previously fee income was included with premiums for
purposes of computing GAAP combined ratios. The 1996 GAAP combined ratios have
been restated to conform to the current year's presentation.
GAAP combined ratios differ from statutory combined ratios primarily due to the
deferral and amortization of certain expenses for GAAP reporting purposes only.
The lower loss and LAE ratios in 1997 were due to the inclusion of Aetna P&C's
results and lower catastrophe losses. Aetna P&C historically has had a lower
loss ratio, which reflects the mix of business including the favorable effect of
the lower loss ratio of the Bond Specialty business. The higher underwriting
expense ratios in 1997 compared to 1996 were due to the inclusion of Aetna P&C,
which historically has had a higher underwriting expense ratio, partially offset
by the continued expense savings associated with the integration of the two
companies.
SEGMENT RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
Commercial Lines
(in millions) Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Revenues ................. $1,624 $ 775
Net income ............... $ 201 $ 76
</TABLE>
12
<PAGE> 13
Commercial Lines net income in the first quarter of 1997 was $201 million
compared to net income of $76 million in the 1996 first quarter. This increase
was primarily due to the post-acquisition results of operations of Aetna P&C, as
well as expense reductions associated with the integration of the two companies
and strong net investment income.
Commercial Lines net written premiums for the first quarter of 1997 totaled
$1.338 billion, up $719 million from $619 million for the first quarter of 1996,
reflecting the acquisition of Aetna P&C, offset in part by the highly
competitive conditions in the marketplace and the Company's continuing focus on
writing profitable business. In addition, the first quarter of 1997 net written
premiums included $142 million due to a change to conform Aetna P&C's with
Travelers Indemnity and its subsidiaries' (Travelers P&C) methods of recording
certain net written premiums within Commercial Lines. Previously, Aetna P&C
recorded written premiums when the premiums were billed. The Company conformed
the Aetna P&C method to the Travelers P&C method of recording written premiums
when the policies are written. The effect of this change on the condensed
consolidated financial statements was not significant. The Commercial Lines
marketplace continues to be highly competitive, although the broader industry
and product line expertise of the combined company contributed to solid
performance in the specialty and small account market segments.
On a combined total basis including Aetna P&C (for periods prior to April 2,
1996 for comparative purposes only), Commercial Lines net written premiums for
the first quarter of 1997 totaled $1.338 billion, up $108 million from $1.230
billion for the first quarter of 1996. This increase in net written premiums was
due to the conforming change outlined above, offset somewhat by the highly
competitive conditions in the marketplace and the Company's continuing focus on
writing profitable business.
Fee income for the first quarter of 1997 was $97 million, a $4 million increase
from the first quarter of 1996. This increase was the result of the acquisition
of Aetna P&C, mostly offset by the depopulation of involuntary pools as the loss
experience of workers' compensation improved and insureds moved to voluntary
markets, the Company's selective renewal activity to address the competitive
pricing environment and its continued success in lowering workers' compensation
losses of customers.
A significant component of Commercial Lines is National Accounts, which works
with national brokers and regional agents providing insurance coverages and
services, primarily workers' compensation, mainly to large corporations.
National Accounts also includes the alternative market business which covers
primarily workers' compensation products and services to voluntary and
involuntary pools. On a combined total basis including Aetna P&C (for periods
prior to April 2, 1996 for comparative purposes only), National Accounts net
written premiums were $221 million for the first quarter of 1997 compared to
$252 million for the first quarter of 1996. This decrease reflected the
competitive marketplace.
National Accounts new business and business retention ratio were significantly
higher in the first quarter of 1997 compared to the first quarter of 1996,
reflecting an unusually low level of new business as well as an unusually low
retention ratio in the first quarter of 1996.
13
<PAGE> 14
Commercial Accounts serves mid-sized businesses through a network of independent
agents and brokers. On a combined total basis including Aetna P&C (for periods
prior to April 2, 1996 for comparative purposes only), Commercial Accounts net
written premiums were $560 million in the 1997 first quarter compared to $441
million in the 1996 first quarter. This increase reflected an increase of $127
million due to the change to conform Aetna P&C's with Travelers P&C's methods of
recording certain net written premiums and the continued growth in programs
designed to leverage underwriting experience in specific industries, partially
offset by the competitive marketplace. For the first quarter of 1997, new
premium business in Commercial Accounts had significantly improved compared to
the first quarter of 1996, reflecting the acquisition of Aetna P&C and continued
growth in programs designed to leverage underwriting experience in specific
industries. The Commercial Accounts business retention ratio in the first
quarter of 1997 had moderately improved compared to the first quarter of 1996.
Commercial Accounts continues to focus on the retention of existing business
while maintaining its product pricing standards and its selective underwriting
policy.
Select Accounts serves small businesses through a network of independent agents.
On a combined total basis including Aetna P&C (for periods prior to April 2,
1996 for comparative purposes only), Select Accounts net written premiums of
$364 million for the first quarter of 1997 were $2 million above the first
quarter of 1996 premium levels. This increase reflected an increase of $15
million due to the change to conform Aetna P&C's with Travelers P&C's methods of
recording certain net written premiums, mostly offset by a decrease due to the
competitive marketplace. New premium business in Select Accounts was moderately
higher in the 1997 first quarter compared to the 1996 first quarter, which
reflected an increase due to the acquisition of Aetna P&C, partially offset by a
decrease due to the competitive marketplace. The Select Accounts business
retention ratio was moderately higher in the 1997 first quarter compared to the
comparable 1996 period, reflecting the broader industry and product line
expertise of the combined company.
Specialty Accounts markets products to national, midsize and small customers and
distributes them through both wholesale brokers and retail agents and brokers
throughout the United States. On a combined total basis including Aetna P&C (for
periods prior to April 2, 1996 for comparative purposes only), Specialty
Accounts net written premiums were $193 million in the 1997 first quarter
compared to $175 million in the 1996 first quarter. The growth is primarily
attributable to increased writings of its excess and surplus lines business.
Claims and expenses of $1.342 billion for the first quarter of 1997 increased
$662 million from the first quarter of 1996. This increase was primarily
attributable to the acquisition of Aetna P&C.
Catastrophe losses, net of taxes and reinsurance, were $5 million and $6 million
in the 1997 and 1996 first quarters, respectively. The 1997 catastrophe losses
were primarily from tornadoes in the Midwest.
Statutory and GAAP combined ratios for Commercial Lines were as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Statutory:
Loss and LAE ratio ............................ 81.7% 86.9%
Underwriting expense ratio .................... 27.4 26.1
Combined ratio before policyholder dividends... 109.1 113.0
Combined ratio ................................ 109.4 113.4
GAAP:
Loss and LAE ratio ............................ 80.7% 86.0%
Underwriting expense ratio .................... 26.7 25.5
Combined ratio before policyholder dividends... 107.4 111.5
Combined ratio ................................ 108.1 111.9
</TABLE>
GAAP combined ratios for Commercial Lines differ from statutory combined ratios
primarily due to the deferral and amortization of certain expenses for GAAP
reporting purposes only.
14
<PAGE> 15
The decreases in the statutory and GAAP combined ratios for Commercial Lines in
the first quarter of 1997 were primarily attributable to the inclusion in 1997
of Aetna P&C's results and expense reductions. The lower loss and LAE ratios in
1997 were due to the inclusion of Aetna P&C's results. Aetna P&C historically
has had a lower loss ratio, which reflects the mix of business including the
favorable effect of the lower loss ratio of the Bond Specialty business. The
higher underwriting expense ratios in 1997 compared to 1996 were due to the
inclusion of Aetna P&C, which historically has had a higher underwriting expense
ratio, partially offset by the continued expense reductions associated with the
integration of the two companies.
<TABLE>
<CAPTION>
Personal Lines
(in millions) Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Revenues ..................... $805 $373
Net income ................... $105 $ 23
</TABLE>
Net income in the first quarter of 1997 of $105 million increased $82 million
from $23 million in the first quarter of 1996. This increase primarily reflects
the post-acquisition results of operations of Aetna P&C, continued favorable
prior year loss reserve development in personal auto lines and no catastrophe
losses in 1997.
Net written premiums in the first quarter of 1997 were $775 million, compared to
$341 million in the first quarter of 1996. This increase primarily reflects the
acquisition of Aetna P&C. On a combined total basis including Aetna P&C (for
periods prior to April 2, 1996 for comparative purposes only), Personal Lines
net written premiums in the first quarter of 1997 totaled $775 million compared
to $658 million in the first quarter of 1996. This increase reflects a change in
reinsurance agreements, growth in the affinity marketing and Secure-sm-
programs, and good retention in traditional markets.
Claims and expenses of $647 million for the first quarter of 1997 increased $306
million from the first quarter of 1996. This increase was primarily attributable
to the acquisition of Aetna P&C. There were no catastrophe losses, after taxes
and reinsurance, in the first quarter of 1997 compared to $18 million in the
first quarter of 1996.
Statutory and GAAP combined ratios for Personal Lines were as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Statutory:
Loss and LAE ratio .............. 61.2% 76.9%
Underwriting expense ratio ...... 28.9 28.4
Combined ratio .................. 90.1 105.3
GAAP:
Loss and LAE ratio .............. 61.2% 76.9%
Underwriting expense ratio ...... 27.4 26.6
Combined ratio .................. 88.6 103.5
</TABLE>
GAAP combined ratios differ from statutory combined ratios for Personal Lines
primarily due to the deferral and amortization of certain expenses for GAAP
reporting purposes only.
15
<PAGE> 16
The decrease in the loss and LAE ratios in 1997 was due to the favorable prior
year loss development, primarily in the automobile bodily injury line, and no
catastrophe losses. The higher underwriting expense ratios in 1997 compared to
1996 were due to the inclusion of Aetna P&C, which historically has had a higher
underwriting expense ratio, partially offset by the continued expense reductions
associated with the integration of the two companies.
<TABLE>
<CAPTION>
Corporate and Other
(in millions) Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Revenues ....................... $ 2 $ 4
Net income (loss) .............. $(33) $ (1)
</TABLE>
The primary component of net income (loss) for the 1997 first quarter was
interest expense of $26 million after tax, reflecting financing costs associated
with the acquisition.
ENVIRONMENTAL CLAIMS
The Company's reserves for environmental claims are not established on a
claim-by-claim basis. An aggregate bulk reserve is carried for all of the
Company's environmental claims that are in the dispute process, until the
dispute is resolved. This bulk reserve is established and adjusted based upon
the volume of in-process environmental claims and the Company's experience in
resolving such claims. At March 31, 1997, approximately 12% of the net
environmental reserve (i.e., approximately $143 million) is case reserves for
resolved claims. The balance, approximately 88% of the net environmental reserve
(i.e., approximately $1.070 billion), is carried in a bulk reserve and includes
incurred but not yet reported environmental claims for which the Company has not
received any specific claims.
The following table displays activity for environmental losses and loss expenses
and reserves for the three months ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
Environmental Losses
(millions) Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Beginning reserves:
Direct ........................ $ 1,369 $ 454
Ceded ......................... (127) (50)
------- -------
Net ........................... 1,242 404
Incurred losses and loss expenses:
Direct ........................ 18 20
Ceded ......................... (1) (3)
Losses paid:
Direct ........................ 50 35
Ceded ......................... (4) (1)
Ending reserves:
Direct ........................ 1,337 439
Ceded ......................... (124) (52)
------- -------
Net ......................... $ 1,213 $ 387
======= =======
</TABLE>
16
<PAGE> 17
ASBESTOS CLAIMS
At March 31, 1997, approximately 24% of the net asbestos reserve (i.e.,
approximately $252 million) is for pending asbestos claims. The balance,
approximately 76% (i.e., approximately $805 million) of the net asbestos
reserves, represents incurred but not yet reported losses.
The following table displays activity for asbestos losses and loss expenses and
reserves for the three months ended March 31, 1997 and 1996. In general, the
Company posts case reserves for pending asbestos claims within approximately 30
business days of receipt of such claims.
<TABLE>
<CAPTION>
Asbestos Losses
(millions) Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Beginning reserves:
Direct ........................ $ 1,443 $ 695
Ceded ......................... (370) (293)
------- -------
Net ........................... 1,073 402
Incurred losses and loss expenses:
Direct ........................ 20 16
Ceded ......................... (7) (5)
Losses paid:
Direct ........................ 52 24
Ceded ......................... (23) (18)
Ending reserves:
Direct ........................ 1,411 687
Ceded ......................... (354) (280)
------- -------
Net ......................... $ 1,057 $ 407
======= =======
</TABLE>
UNCERTAINTY REGARDING ADEQUACY OF ENVIRONMENTAL AND ASBESTOS RESERVES
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. Conventional actuarial techniques are not used to estimate such
reserves.
The reserves carried for environmental and asbestos claims at March 31, 1997 are
the Company's best estimate of ultimate claims and claim adjustment expenses
based upon known facts and current law. However, the conditions surrounding the
final resolution of these claims continues to change. Currently, it is 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 and
changes in legislation. Because of these future unknowns, additional
liabilities may arise for amounts in excess of the current reserves. These
additional amounts, or a range of these additional amounts, cannot now be
reasonably estimated, and could result in a liability exceeding reserves by an
amount that would be material to the Company's operating results in a future
period. However, the Company believes that it is not likely that these claims
will have a material adverse effect on the Company's financial condition or
liquidity.
17
<PAGE> 18
CUMULATIVE INJURY OTHER THAN ASBESTOS (CIOTA) CLAIMS
CIOTA claims are generally submitted to the Company 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. Such potentially harmful
products or substances include, but are not limited to, lead paint, pesticides,
pharmaceutical products, silicone-based personal products, solvents and other
deleterious substances.
At March 31, 1997, approximately 19% of the net CIOTA reserve (i.e.,
approximately $214 million) is for pending CIOTA claims. The balance,
approximately 81% (i.e., approximately $903 million) of the net CIOTA reserves,
represents incurred but not yet reported losses for which the Company has not
reviewed any specific claims.
The following table displays activity for CIOTA losses and loss expenses and
reserves for the three months ended March 31, 1997 and 1996. In general, the
Company posts case reserves for pending CIOTA claims within approximately 30
business days of receipt of such claims.
<TABLE>
<CAPTION>
CIOTA Losses
(millions) Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Beginning reserves:
Direct ........................ $ 1,560 $ 374
Ceded ......................... (446) --
------- -------
Net ........................... 1,114 374
Incurred losses and loss expenses:
Direct ........................ 6 21
Ceded ......................... -- --
Losses paid:
Direct ........................ 8 8
Ceded ......................... (5) --
Ending reserves:
Direct ........................ 1,558 387
Ceded ......................... (441) --
------- -------
Net ......................... $ 1,117 $ 387
======= =======
</TABLE>
Liquidity and Capital Resources
TAP was formed in January 1996 to hold the property and casualty insurance
subsidiaries of The Travelers Insurance Group Inc. (TIGI). TIGI contributed to
TAP all of the outstanding shares of common stock of Travelers Indemnity on
April 1, 1996. On April 2, 1996, TAP acquired the domestic property and casualty
insurance subsidiaries of Aetna for approximately $4.2 billion in cash. TAP is a
holding company and has no direct operations. TAP's principal asset is the
capital stock of its insurance subsidiaries.
The liquidity requirements of the Company's business have been met primarily by
funds generated from operations, asset maturities and income received on
investments. Cash provided from these sources is used primarily for claims and
claim adjustment expense payments and operating expenses. Catastrophe claims,
the timing and amount of which are inherently unpredictable, may create
increased liquidity requirements. Additional sources of cash flow include the
sale of invested assets and financing activities. The Company believes that its
future liquidity needs will be met from all of the above sources.
18
<PAGE> 19
Net cash flows are generally invested in marketable securities. The Company
closely monitors the duration of these investments, and investment purchases and
sales are executed with the objective of having adequate funds available to
satisfy the Company's maturing liabilities. As the Company's investment strategy
focuses on asset and liability durations, and not specific cash flows, asset
sales may be required to satisfy liability obligations and/or rebalance asset
portfolios. The Company's invested assets at March 31, 1997 totaled $29.4
billion, of which 81.7% was invested in fixed maturity investments, 3.9% in
mortgage loans and real estate held for sale, 3.2% in common stocks and other
equity securities and 11.2% in short-term and other investments. The average
duration of the fixed maturity portfolio, including short-term investments, was
4.8 years at such date. Included in fixed maturity investments are
non-investment grade securities totaling $697 million, representing
approximately 2.9% of the Company's fixed maturity investments as of March 31,
1997. The following table reflects the average yield (annualized) of the
investment portfolio:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Average Yield (Annualized) (1) 7.0% 6.4%
</TABLE>
(1) Excluding unrealized and realized investment gains and losses.
Cash flow needs at TAP include stockholder dividends and debt service. TAP meets
its cash flow needs primarily through dividends from operating subsidiaries. In
addition, TAP currently has available to it a $200 million line of credit for
working capital and other general corporate purposes from a subsidiary of
Travelers Group Inc. The lender has no obligation to make any loan to TAP under
this line of credit. Moreover, TAP will continue to be able to borrow under a
$500 million five-year revolving credit facility that expires on December 19,
2001 (the Credit Facility), none of which is currently utilized. Under the
Credit Facility, TAP is required to maintain a certain level of consolidated
stockholders' equity (as defined in the agreement). At March 31, 1997, this
requirement was exceeded by approximately $3.0 billion. In addition, the Credit
Facility places restrictions on the amount of consolidated debt TAP can incur.
TAP also issues commercial paper directly to investors and maintains unused
credit availability under the Credit Facility at least equal to the amount of
commercial paper outstanding. At March 31, 1997, TAP had no commercial paper
outstanding.
At March 31, 1997, TAP had issued a total of $1.25 billion of, and had $750
million available for, debt offerings under its shelf registration statement.
The Company'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.
Dividend payments to TAP from its insurance subsidiaries are limited to $647
million in 1997 without prior approval of the Connecticut Insurance Department.
The Company has received $80 million of dividends from its insurance
subsidiaries during the first three months of 1997.
On July 24, 1996, TAP's Board of Directors authorized the expenditure of up to
$100 million for the repurchase of common stock. The repurchases may be made
from time to time in the open market or through negotiated transactions and will
be used primarily for stock grants related to employee benefit and director
compensation plans. At March 31, 1997, the Company had repurchased approximately
847 thousand shares of its common stock for approximately $29 million pursuant
to the repurchase program.
On January 22, 1997, the Company, through its Capital Accumulation Plan (the
Plan), issued 414 thousand shares of the Company's Class A Common Stock and
reissued 502 thousand shares of treasury stock in the form of restricted stock
to participating officers and other key employees. The restricted stock
generally vests after a three-year period. Except under limited circumstances,
the stock cannot 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 restricted
stock grants represents the market value of the Company's common stock at the
date of grant and is recognized as a charge to income ratably over the vesting
period.
19
<PAGE> 20
Future Application of Accounting Standards
In December 1996 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125" (FAS 127),
which delays until January 1, 1998 the effective date for certain provisions
of FASB Statement No. 125 (see note 3). The Company is currently evaluating
the impact of the provisions whose effective date has been delayed until
January 1, 1998.
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, "Earnings per Share" (FAS 128). FAS 128 establishes standards for
computing and presenting earnings per share (EPS) and applies to entities with
publicly held common stock. FAS 128 simplifies the standards for computing
earnings per share previously found in Accounting Principles Board Opinion No.
15, "Earnings per Share" (Opinion 15) and makes them comparable to international
EPS standards. It replaces the presentation of primary EPS with a presentation
of basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised.
FAS 128 supersedes Opinion 15 and related accounting interpretations and is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. However,
an entity is permitted to disclose pro forma amounts computed using this
Statement in the notes to the financial statements in periods prior to required
adoption.
On a pro forma basis for the first quarter of 1997 and 1996, basic and diluted
EPS are equal to primary and fully diluted EPS, respectively.
20
<PAGE> 21
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
For information concerning actions filed against several
insurance companies and industry organizations relating to service fee charges
and premium calculations on certain workers' compensation insurance, see the
descriptions that appear in the paragraph that begins on page 90 and ends on
page 91 of the Company's Prospectus dated April 22, 1996, the first paragraph on
page 24 of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, the first paragraph on page 25 of the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996 and the paragraph that
begins on page 54 and ends on page 55 of the Company's Annual Report on Form
10-K for the year ended December 31, 1996, which descriptions are incorporated
by reference herein. A copy of the pertinent paragraphs of such filings is
included as an exhibit to this Form 10-Q. In April 1997, the purported class of
Texas workers' compensation insurers that filed a petition to intervene in
Travelers Indemnity Company of Connecticut v. Texas Workers Compensation
Insurance Facility withdrew its claims against the Company's subsidiaries.
However, in May 1997, such purported class filed a second amended petition in
intervention alleging substantially the same claims as the original petition but
covering the periods from 1992 through 1994.
For information concerning the appeal of a Memorandum of
Decision issued by the Connecticut Department of Insurance approving the
acquisition by the Company of Aetna P&C, see the descriptions that appear in the
second full paragraph on page 91 of the Company's Prospectus dated April 22,
1996 and the first paragraph on page 55 of the Company's Annual Report on Form
10-K for the year ended December 31, 1996, which descriptions are incorporated
by reference herein. A copy of the pertinent paragraphs of such filings is
included as an exhibit to this Form 10-Q. In April 1997, the appellate court
dismissed the appeal. Plaintiffs have requested that the Connecticut Supreme
Court review the appellate court's decision.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders was held on April
23, 1997. At the meeting, (i) an amendment to the Company's Restated Certificate
of Incorporation to declassify the Board of Directors was approved, (ii) 9
persons were elected as directors of the Company, (iii) the selection of KPMG
Peat Marwick LLP to serve as the independent auditors of the Company for 1997
was ratified, (iv) a proposal to adopt the Travelers Property Casualty Corp.
Executive Option Plan was approved, and (v) a proposal to adopt the Travelers
Property Casualty Corp. Executive Performance Compensation Plan was approved.
The number of votes cast for, against or withheld, and the number of abstentions
with respect to each such matter is set forth below, as are the number of broker
non-votes, where applicable.
21
<PAGE> 22
<TABLE>
<CAPTION>
For Against/Withheld Abstained Broker Non-Votes
<S> <C> <C> <C> <C>
Approval of Amendment
to Certificate of
Incorporation: 3,317,945,006 425,779 1,215,711 6,222,317
Election of Directors:
NOMINEE
Kenneth J. Bialkin 3,324,204,309 1,604,503
John J. Byrne 3,324,594,156 1,214,656
James Dimon 3,324,401,458 1,407,354
Robert I. Lipp 3,324,396,726 1,412,086
Dudley C. Mecum 3,324,391,860 1,416,952
Roberto G. Mendoza 3,324,396,348 1,412,464
Frank J. Tasco 3,324,585,281 1,223,531
Sanford I. Weill 3,324,391,515 1,417,297
Arthur Zankel 3,324,605,170 1,203,642
Ratification of Auditors: 3,324,599,734 78,978 1,130,101 0
Approval of Travelers
Property Casualty Corp.
Executive Option Plan 3,314,944,452 3,275,213 1,366,830
Approval of Travelers
Property Casualty Corp.
Executive Compensation
Plan 3,323,299,848 1,108,195 1,313,873 156,896
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
See Exhibit Index.
(b) REPORTS ON FORM 8-K:
On January 21, 1997, the Company filed a Current Report on
Form 8-K, dated January 21, 1997, reporting under Item 5 thereof certain
additional financial information of the Company for the three months ended
December 31, 1996 and the year ended December 31, 1996.
On February 10, 1997, the Company filed a Current Report
on Form 8-K, dated February 10, 1997, reporting under Item 5 thereof certain
additional financial information of the Company as of December 31, 1996.
No other reports on Form 8-K have been filed by the
Company during the quarter ended March 31, 1997; however, on April 17, 1997, the
Company filed a Current Report on Form 8-K, dated April 17, 1997, reporting
under Item 5 thereof certain additional financial information of the Company as
of March 31, 1997.
22
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Filing
Number Description of Exhibit Method
- ------ ---------------------- ------
<S> <C> <C>
3.01 Restated Certificate of Incorporation of Travelers Property Casualty Corp. Electronic
(formerly Travelers/Aetna Property Casualty Corp.) (the "Company"), Certificate
of Designations, Powers, Preferences and Rights of 7.5% Redeemable Preferred
Stock, Series Z, of the Company, Certificate of Amendment to the Restated
Certificate of Incorporation, filed March 7, 1997, and Certificate of Amendment
to the Restated Certificate of Incorporation, filed April 23, 1997.
3.02 Restated By-laws of the Company, effective April 23, 1997. Electronic
11.01 Computation of Earnings Per Share Electronic
12.01 Computation of Ratio of Earnings to Fixed Charges Electronic
27.01 Financial Data Schedule Electronic
99.01 The paragraph that begins on page 90 and ends on page 91 of the Company's Electronic
Prospectus dated April 22, 1996, the first paragraph on page 24 of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996, the first
paragraph on page 25 of the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996 and the paragraph that begins on page 54
and ends on page 55 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.
99.02 The second full paragraph on page 91 of the Company's Prospectus dated April 22, Electronic
1996 and the first paragraph on page 55 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
</TABLE>
The total amount of securities authorized pursuant to any other instrument
defining rights of holders of long-term debt of the Company does not exceed 10%
of the total assets of the Company and its consolidated subsidiaries. The
Company will furnish copies of any such instrument to the Securities and
Exchange Commission upon request.
23
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRAVELERS PROPERTY CASUALTY CORP.
Date: May 13, 1997 By /s/ William P. Hannon
-----------------------
William P. Hannon
Chief Financial Officer
(Principal Financial Officer)
Date: May 13, 1997 By /s/ Thomas P. Shugrue
----------------------
Thomas P. Shugrue
Chief Accounting Officer
(Principal Accounting Officer)
24
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Filing
Number Description of Exhibit Method
- ------ ---------------------- ------
<S> <C> <C>
3.01 Restated Certificate of Incorporation of Travelers Property Casualty Corp. Electronic
(formerly Travelers/Aetna Property Casualty Corp.) (the "Company"), Certificate
of Designations, Powers, Preferences and Rights of 7.5% Redeemable Preferred
Stock, Series Z, of the Company, Certificate of Amendment to the Restated
Certificate of Incorporation, filed March 7, 1997, and Certificate of Amendment
to the Restated Certificate of Incorporation, filed April 23, 1997.
3.02 Restated By-laws of the Company, effective April 23, 1997. Electronic
11.01 Computation of Earnings Per Share Electronic
12.01 Computation of Ratio of Earnings to Fixed Charges Electronic
27.01 Financial Data Schedule Electronic
99.01 The paragraph that begins on page 90 and ends on page 91 of the Company's Electronic
Prospectus dated April 22, 1996, the first paragraph on page 24 of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996, the first
paragraph on page 25 of the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996 and the paragraph that begins on page 54
and ends on page 55 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.
99.02 The second full paragraph on page 91 of the Company's Prospectus dated April 22, Electronic
1996 and the first paragraph on page 55 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
</TABLE>
<PAGE> 1
Exhibit 3.01
RESTATED CERTIFICATE OF INCORPORATION
OF
TRAVELERS/AETNA PROPERTY CASUALTY CORP.
(Pursuant to Sections 242 and 245 of the Delaware General
Corporation Law)
Travelers/Aetna Property Casualty Corp., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The name of the Corporation is Travelers/Aetna Property
Casualty Corp. The name under which the Corporation was originally incorporated
was Travelers P&C Holdings Inc. and the original Certificate of Incorporation
was filed with the Secretary of State on January 3, 1996.
2. This Restated Certificate of Incorporation restates and
integrates and also further amends the Certificate of Incorporation of the
Corporation, as heretofore amended. This Restated Certificate of Incorporation
was proposed by the Board of Directors and duly adopted by the sole stockholder
of the Corporation in the manner and by the vote prescribed by Sections 228, 242
and 245 of the General Corporation Law of the State of Delaware. The text of the
Certificate of Incorporation, as so amended and restated is as follows:
FIRST: The name of the Corporation is: Travelers/Aetna
Property Casualty Corp. (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
<PAGE> 2
FOURTH: A. Authorized Shares. The total number of shares of
stock which the Corporation shall have the authority to issue is 1,425,000,000
shares consisting of 700,000,000 shares of Class A common stock with a par value
of $.01 per share (the "Class A Common Stock"), 700,000,000 shares of Class B
common stock with a par value of $.01 per share (the "Class B Common Stock" and,
together with the Class A Common Stock, the "Common Stock"), and 25,000,000
shares of preferred stock with a par value of $.10 per share (the "Preferred
Stock"). The number of authorized shares of Class A Common Stock or Class B
Common Stock may be increased or decreased (but not below the number of shares
of Class A Common Stock or Class B Common Stock then outstanding) by the
affirmative vote of a majority of the aggregate voting power of the outstanding
shares of Class A Common Stock and Class B Common Stock, voting together without
regard to class.
Effective upon the filing of this Restated Certificate of
Incorporation with the Secretary of State, each share of Common Stock, par value
$.01 per share, of the Corporation outstanding as of the close of business on
the day prior to the date of such filing shall be reclassified on a basis of one
share of Class B Common Stock for each share of Common Stock outstanding and,
accordingly, each share of Common Stock outstanding as of the close of business
on the day prior to the date of such filing, each having a par value of $.01 per
share, shall, without further action by the Corporation or any stockholder, be
deemed to represent one share of Class B Common Stock, par value $.01 per share.
B. Ranking. The powers, preferences and rights of the Class A
Common Stock and Class B Common Stock, and the qualifications, limitations and
restrictions thereof, shall be in all respects identical, except as otherwise
required by law or expressly provided in this Restated Certificate of
Incorporation.
C. Voting. Except as otherwise required by law or in this
Restated Certificate of Incorporation, with respect to all matters upon which
stockholders are entitled to vote or to which stockholders are entitled to give
consent, the holders of any outstanding shares of the Class A Common Stock and
the holders of any outstanding shares of Class B Common Stock shall vote
together without regard to class, and every holder of the Class A
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Common Stock shall be entitled to cast thereon one (1) vote in person or by
proxy for each share of the Class A Common Stock standing in such holder's name,
and every holder of the Class B Common Stock shall be entitled to cast thereon
ten (10) votes in person or by proxy for each share of Class B Common Stock
standing in such holder's name.
D. Amendments Affecting Stock. So long as any shares of Class
A Common Stock are outstanding, the Corporation shall not, without the
affirmative vote of at least a majority (or such higher percentage, if any, as
may then be required by applicable law) of the outstanding shares of Class A
Common Stock voting as a single class, (i) amend, alter or repeal any provision
of Sections B through K of this Article FOURTH so as to affect adversely the
relative rights, preferences, qualifications, limitations or restrictions of the
Class A Common Stock as compared to those of the Class B Common Stock or (ii)
take any other action upon which class voting is required by law.
E. Dividends; Changes in Stock. No dividend or distribution
may be declared or paid on any share of Class A Common Stock unless a dividend
or distribution, payable in the same consideration and manner, is simultaneously
declared or paid, as the case may be, on each share of Class B Common Stock, nor
shall any dividend or distribution be declared or paid on any share of Class B
Common Stock unless a dividend or distribution, payable in the same
consideration and manner, is simultaneously declared or paid, as the case may
be, on each share of Class A Common Stock, in each case without preference or
priority of any kind; provided, however, that if dividends are declared that are
payable in shares of Class A Common Stock or in Class B Common Stock or in
rights, options, warrants or other securities convertible into or exchangeable
for shares of Class A Common Stock or Class B Common Stock, dividends shall be
declared that are payable at the same rate on both classes of Common Stock and
the dividends payable in shares of Class A Common Stock or in rights, options,
warrants or other securities convertible into or exchangeable for shares of
Class A Common Stock shall be payable to holders of Class A Common Stock and the
dividends payable in shares of
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<PAGE> 4
Class B Common Stock or in rights, options, warrants or other securities
convertible into or exchangeable for shares of Class B Common Stock shall be
payable to holders of Class B Common Stock. If the Corporation in any manner
subdivides or combines the outstanding shares of Class B Common Stock, the
outstanding shares of the Class A Common Stock shall be proportionately
subdivided or combined, as the case may be. Similarly, if the Corporation in any
manner subdivides or combines the outstanding shares of Class A Common Stock,
the outstanding shares of the Class B Common Stock shall be proportionately
subdivided or combined, as the case may be.
F. Optional Conversion. (i) Each share of Class B Common Stock
shall be convertible at any time while beneficially owned by Travelers (as
defined in Article SEVENTH hereof) or a Class B Transferee (as defined below),
if any, at the option of the holder thereof into one share of Class A Common
Stock, subject to adjustment as provided in paragraph (iv) of this Section F and
subject to the conditions and limitations described below and in the manner
described below; provided, however, that following the disposition of Class B
Common Stock beneficially owned by Travelers Group Inc. ("Travelers Group") or a
Class B Transferee (as defined in Section G below) effected in connection with a
transfer of such Class B Common Stock to stockholders of Travelers Group or
stockholders of a Class B Transferee, as the case may be, as a spin-off,
split-off or split-up which is intended to be on a tax-free basis (a "Tax-Free
Spin-Off") under the United States Internal Revenue Code of 1986, as amended
(the "Code"), no shares of Class B Common Stock shall be so convertible into
shares of Class A Common Stock at the option of the holder thereof from and
after the date of such disposition.
(ii) In order to convert shares of Class B Common Stock into
Class A Common Stock pursuant to this Section F, the holder thereof shall
surrender to the Corporation the certificate or certificates therefor, duly
endorsed or assigned to the Corporation or in blank, and give written notice to
the Corporation that he elects to convert such shares. Such notice shall be
dated and received by the Corporation at least one business day prior to the
date fixed for conversion and shall state (a) the number of shares of Class B
Common Stock to be converted, (b) the date fixed for conversion, (c) the
denominations in which the shares of Class A Common Stock issuable upon such
conversion are to be issued, (d) the
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<PAGE> 5
name in which the shares of Class A Common Stock are to be registered, if
different from the registered holder of the Class B Common Stock being converted
and (e) the name and address of the registered holder requesting such
conversion.
(iii) Shares of Class B Common Stock shall be deemed to have
been converted immediately prior to the close of business on the day of the
surrender of such shares for conversion in accordance with the foregoing
provisions, and the person or persons entitled to receive Class A Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Class A Common Stock at such time. As promptly as
practicable on or after the conversion date, the Corporation shall issue and
shall deliver a certificate or certificates for the number of shares of Class A
Common Stock issuable upon such conversion to the person or persons entitled to
receive the same.
(iv) If there occurs any capital reorganization or any
reclassification of the capital stock of the Corporation (other than a
subdivision or combination described in Section E or pursuant to a merger or
consolidation referred to in Section I), each share of Class B Common Stock
shall thereafter be convertible into, in lieu of one share of Class A Common
Stock, the same kind and amounts of securities or other assets, or both, which
were issuable or distributable to the holders of shares of outstanding Class A
Common Stock of the Corporation upon such reorganization or reclassification in
respect to that number of shares of Class A Common Stock into which such share
of Class B Common Stock would have been converted had such share of Class B
Common Stock been converted into Class A Common Stock immediately prior to such
reorganization or reclassification.
(v) Upon any event described in paragraph (iv) above, the
Corporation shall promptly mail to each holder of Class B Common Stock a notice
which shall describe such event and the change in the number of shares or other
assets or securities issuable upon the conversion of Class B Common Stock,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
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(vi) The Corporation will pay any and all taxes that may be
payable in respect of the issue or delivery of shares of Class A Common Stock on
conversion of the Class B Common Stock pursuant hereto. The Corporation shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Class A Common Stock in
a name other than that in which the shares of Class B Common Stock so converted
were registered, and no such issue or delivery shall be made unless and until
the person requesting such issue has paid to the Corporation the amount of any
such tax, or has established to the satisfaction of the Corporation that such
tax has been paid.
G. Automatic Conversion. (i) Except as otherwise provided in
subsections (ii) and (iii) below, upon any issuance by the Corporation, or any
sale or other transfer by a stockholder of the Corporation, of shares of Class B
Common Stock, of rights, options or warrants to purchase Class B Common Stock or
of securities convertible into or exchangeable for shares of Class B Common
Stock to any person or persons other than Travelers (as defined in Article
SEVENTH hereof) or a Class B Transferee, including, without limitation, pursuant
to any private placement or public sale of such shares (including a public
offering registered under the Securities Act of 1933 and a sale pursuant to Rule
144 under the Securities Act of 1933 or any similar rule then in force), such
shares shall automatically convert into an equal number of shares of Class A
Common Stock (with the same rights and restrictions as shares of Class A Common
Stock generally), and such rights, options, warrants or convertible or
exchangeable securities shall automatically convert into rights, options or
warrants to purchase Class A Common Stock or securities convertible into or
exchangeable for shares of Class A Common Stock (otherwise with terms identical
to the rights, options, warrants or convertible or exchangeable securities that
so automatically convert), in each case, without any further action on the part
of the Corporation or any other person, and the certificates representing such
shares, rights, options, warrants or convertible or exchangeable securities
shall be deemed to represent shares of Class A Common Stock, rights, options or
warrants to purchase shares of Class A Common Stock or securities convertible
into or exchangeable for shares of Class A Common Stock,
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<PAGE> 7
as the case may be. For purposes of this Section G: (a) a "person" shall mean a
corporation, a trust, a limited liability company, an association, a
partnership, a joint venture, an organization, a business, an individual, a
government or a subdivision thereof or a governmental agency and (b) the term
"transfer" shall not include a bona fide pledge of shares of Class B Common
Stock.
(ii) Notwithstanding the foregoing, if shares of Class B
Common Stock representing more than 50% of all of the then outstanding shares of
Common Stock are transferred by Travelers in a single transaction, or series of
related transactions, to one person (other than an underwriter of such stock in
connection with a bona fide underwriting of such stock), or group of affiliated
persons, that is not an affiliate (within the meaning of the rules and
regulations under the Securities Act of 1933) of Travelers (together with any
wholly owned subsidiary of such transferee to whom such transferee transfers all
or a portion of such shares of Class B Common Stock, a "Class B Transferee")
such shares of Class B Common Stock so transferred shall not automatically
convert into shares of Class A Common Stock upon such transfer. Any shares of
Class B Common Stock retained by Travelers following any such transfer to a
Class B Transferee shall automatically convert into shares of Class A Common
Stock upon such transfer without any further action by the Corporation or any
other person and the certificates representing such shares shall be deemed to
represent shares of Class A Common Stock.
(iii) Notwithstanding the foregoing, (a) if shares of Class B
Common Stock are transferred to stockholders of Travelers Group or stockholders
of a Class B Transferee in a Tax-Free Spin-Off, each share of Class B Common
Stock so transferred shall not automatically convert into shares of Class A
Common Stock upon such transfer and (b) following a Tax-Free Spin-Off, all
outstanding shares of Class B Common Stock shall not automatically convert into
shares of Class A Common Stock upon the transfer thereof by any holder thereof;
provided, however, that all outstanding shares of Class B Common Stock shall
automatically convert into shares of Class A Common Stock on the fifth
anniversary of a Tax-Free Spin-Off, unless prior to the occurrence of such
Tax-Free Spin-Off, Travelers Group or the Class B Transferee, as the case may
be, delivers to the Corporation a written opinion
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<PAGE> 8
reasonably satisfactory to the Corporation (which, in the case of Travelers
Group, may include, without limitation, an opinion of Travelers Group's Chief
Accounting Officer or Vice President of Taxes) to the effect that such
conversion would preclude Travelers Group or the Class B Transferee, as the case
may be, from obtaining a favorable ruling from the Internal Revenue Service that
such transfer of Class B Common Stock would be a Tax-Free Spin-Off. If such an
opinion is received, such Class B Common Stock shall not automatically convert
into Class A Common Stock on such fifth anniversary date and the Corporation
shall cause approval of such conversion to be submitted to a vote of the holders
of the Common Stock as soon as practicable after the fifth anniversary of the
Tax-Free Spin-Off unless Travelers Group or the Class B Transferee, as the case
may be, delivers to the Corporation a written opinion reasonably satisfactory to
the Corporation (which, in the case of Travelers Group, may include, without
limitation, an opinion of Travelers Group's Chief Accounting Officer or Vice
President of Taxes) prior to such fifth anniversary to the effect that such vote
would adversely affect the status of the Tax-Free Spin-Off as tax free under the
Code. Approval of such conversion shall require the affirmative vote of the
holders of a majority of the shares of Common Stock present and voting, voting
together without regard to class, with each share entitled to one vote for such
purpose.
H. Liquidation. Shares of Class B Common Stock shall rank pari
passu with the Class A Common Stock as to distribution of assets in the event of
any liquidation, dissolution or winding up of the affairs of the Corporation.
I. Reorganization or Merger. In the event of a merger or
consolidation of the Corporation with or into another entity (whether or not the
Corporation is the surviving entity), the holders of each share of Class A
Common Stock and Class B Common Stock shall be entitled to receive the same per
share consideration as the per share consideration, if any, received by the
holders of each share of such other class of stock.
J. Status of Converted Stock. Any shares of Class B Common
Stock that shall have been converted into Class A Common Stock at any time
pursuant to the provi-
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sions of Section F or Section G of this Article FOURTH shall, after such
conversion, be cancelled and shall not be reissued.
K. Reservation. The Corporation shall at all times reserve and
keep available, free from pre-emptive rights, out of its authorized but unissued
shares of Class A Common Stock solely for the purpose of issuance upon the
conversion of the Class B Common Stock, such number of shares of Class A Common
Stock issuable upon the conversion of all outstanding Class B Common Stock. All
shares of Class A Common Stock which are so issuable shall, when issued, be duly
and validly issued, fully paid and nonassessable. The Corporation shall take all
such actions as it deems necessary or appropriate to assure that all such shares
of Class A Common Stock may be so issued without violation of any applicable law
or governmental regulation or any requirements of any securities exchange upon
which shares of Class A Common Stock may be listed.
L. Preferred Stock. The Corporation may issue Preferred Stock
from time to time in one or more series as the Board of Directors may establish
by the adoption of a resolution or resolutions relating thereto, each series to
have such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions providing for the issue of
such series adopted by the Board of Directors pursuant to authority to do so,
which authority is hereby granted to the Board of Directors.
FIFTH: A. The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors, the number of
directors to be determined from time to time by resolution adopted by
affirmative vote of a majority of the entire Board of Directors which the
Corporation would have if there were no vacancies. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. The initial
division of the Board of Directors into classes shall be made by
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<PAGE> 10
the decision of the affirmative vote of a majority of the entire Board of
Directors. Class I directors shall be elected initially for a one-year term,
Class II directors initially for a two-year term and Class III directors
initially for a three-year term. At each succeeding annual meeting of
stockholders beginning in 1997, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall 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 shall hold office for a
term that shall 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. A director shall hold office until the annual meeting for the year in
which his term expires and until his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board of Directors
that results from an increase in the number of directors may be filled by a
majority of the Board of Directors then in office, provided that a quorum is
present, and any other vacancy occurring in the Board of Directors may be filled
by a majority of the Board of Directors then in office, subject to any
contractual provisions to the contrary, even if less than a quorum, or a sole
remaining director. Any director elected to fill a vacancy not resulting from an
increase in the number of directors shall have the same remaining term as that
of his predecessor. Notwithstanding the foregoing, whenever the holders of any
one or more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of this Restated Certificate of Incorporation applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Article
FIFTH unless expressly provided by such terms.
B. Notwithstanding any other provision of this Restated
Certificate of Incorporation, the affirmative vote of the holders of at least
eighty percent (80%) of
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the voting power of the shares entitled to vote at an election of directors
shall be required to amend, alter, change or repeal, or to adopt any provision
as part of this Restated Certificate of Incorporation inconsistent with the
purpose and intent of, this Article FIFTH.
SIXTH: The books and records of the Corporation may be kept
(subject to any mandatory requirement of law) outside the State of Delaware at
such place or places as may be designated from time to time by the Board of
Directors or by the By-Laws of the Corporation.
SEVENTH: A. In anticipation that the Corporation and Travelers
may engage in the same or similar activities or lines of business and have an
interest in the same areas of corporate opportunities, and in recognition of the
benefits to be derived by the Corporation through its continued contractual,
corporate and business relations with Travelers (including service of officers
and directors of Travelers as directors of the Corporation), the provisions of
this Article SEVENTH are set forth to regulate and define the conduct of certain
affairs of the Corporation as they may involve Travelers and its officers and
directors, and the powers, rights, duties and liabilities of the Corporation and
its officers, directors and stockholders in connection therewith.
B. Subject to any contractual provisions to the contrary,
Travelers shall have the right to, and shall have no duty not to, (i) engage in
the same or similar business activities or lines of business as the Corporation,
(ii) do business with any client or customer of the Corporation and (iii) employ
or otherwise engage any officer or employee of the Corporation, and neither
Travelers nor any officer or director thereof (except as provided in Section C
of this Article SEVENTH) shall be liable to the Corporation or its stockholders
for breach of any fiduciary duty by reason of any such activities of Travelers
or of such person's participation therein. In the event that Travelers acquires
knowledge of a potential transaction or matter which may be a corporate
opportunity for both Travelers and the Corporation, Travelers shall have no duty
to communicate or present such corporate opportunity to the Corporation and
shall not be liable to the Corporation or its stockholders for breach of any
fiduciary duty as a stockholder of the Corporation by reason of the fact that
Travelers pursues
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or acquires such corporate opportunity for itself, directs such corporate
opportunity to another person or entity, or does not present such corporate
opportunity to the Corporation.
C. In the event that a director or officer of the Corporation
who is also a director or officer of Travelers acquires knowledge of a potential
transaction or matter which may be a corporate opportunity for both the
Corporation and Travelers, such director or officer of the Corporation (a) shall
have fully satisfied and fulfilled his fiduciary duty to the Corporation and its
stockholders with respect to such corporate opportunity, (b) shall not be liable
to the Corporation or its stockholders for breach of any fiduciary duty by
reason of the fact that Travelers pursues or acquires such corporate opportunity
for itself or directs such corporate opportunity to another person or does not
present such corporate opportunity to the Corporation, (c) shall be deemed to
have acted in good faith and in a manner such person reasonably believes to be
in and not opposed to the best interests of the Corporation for the purposes of
Article TWELFTH and the other provisions of this Restated Certificate of
Incorporation and (d) shall be deemed not to have breached his duty of loyalty
to the Corporation or its stockholders or to have derived an improper personal
benefit therefrom for the purposes of Article TWELFTH and the other provisions
of this Restated Certificate of Incorporation, if such director or officer acts
in good faith in a manner consistent with the following policy:
(i) a corporate opportunity offered to any person who is an
officer of the Corporation and who is also a director but not an
officer of Travelers shall belong to the Corporation, unless such
opportunity is expressly offered to such person solely in his capacity
as a director of Travelers in which case such opportunity shall belong
to Travelers;
(ii) a corporate opportunity offered to any person who is a
director but not an officer of the Corporation and who is also a
director or officer of Travelers shall belong to the Corporation only
if such opportunity is expressly offered to such person solely in his
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capacity as a director of the Corporation, and otherwise shall belong
to Travelers; and
(iii) a corporate opportunity offered to any person who is an
officer of both the Corporation and Travelers shall belong to Travelers
unless (x) such person is an employee of the Corporation or (y) such
opportunity is expressly offered to such person solely in his capacity
as an officer of the Corporation, in either of which case such
opportunity shall belong to the Corporation.
D. For the purposes of this Article SEVENTH, "corporate
opportunities" shall include, but not be limited to, business opportunities
which the Corporation is financially able to undertake, which are, from their
nature, in the line of the Corporation's business, are of practical advantage to
it and are ones in which the Corporation has an interest or a reasonable
expectancy, and in which, by embracing the opportunities, the self-interest of
Travelers or its officers or directors, will be brought into conflict with that
of the Corporation.
E. Any person or entity purchasing or otherwise acquiring any
interest in shares of capital stock of the Corporation shall be deemed to have
notice of and consented to the provisions of this Article SEVENTH.
F. For purposes of this Article SEVENTH, and, to the extent
set forth therein, Article EIGHTH and Article NINTH (subject to Section E of
Article NINTH) hereof:
1. "Travelers" shall mean Travelers Group Inc., a
Delaware corporation, all successors to Travelers Group Inc.
by way of merger, consolidation or sale of all or
substantially all of its assets, and all corporations,
partnerships, joint ventures, limited liabilities companies,
trusts, associations and other entities in which Travelers
Group Inc. owns (directly or indirectly) fifty percent (50%)
or more of the outstanding voting stock, voting power,
partnership interests or similar ownership interests, but
shall not include the Corporation; and
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2. the "Corporation" shall mean the Corporation and
all corporations, partnerships, joint ventures, limited
liability companies, trusts, associations and other entities
in which the Corporation owns (directly or indirectly) fifty
percent (50%) or more of the outstanding voting stock, voting
power, partnership interests or similar ownership interests.
G. If any contract, agreement, arrangement or transaction
between the Corporation and Travelers involves a corporate opportunity and is
approved in accordance with the procedures set forth in Article EIGHTH of this
Restated Certificate of Incorporation, Travelers and its officers and directors
shall also for the purposes of this Article SEVENTH and the other provisions of
this Restated Certificate of Incorporation (a) have fully satisfied and
fulfilled their fiduciary duties to the Corporation and its stockholders, (b) be
deemed to have acted in good faith and in a manner such persons reasonably
believe to be in and not opposed to the best interests of the Corporation and
(c) be deemed not to have breached their duties of loyalty to the Corporation
and its stockholders and not to have derived an improper personal benefit
therefrom. Any such contract, agreement, arrangement or transaction involving a
corporate opportunity not so approved shall not by reason thereof result in any
such breach of any fiduciary duty or duty of loyalty or failure to act in good
faith or in the best interests of the Corporation or derivation of any improper
personal benefit, but shall be governed by the other provisions of this Article
SEVENTH, this Restated Certificate of Incorporation, the By-Laws, the GCL and
other applicable law.
H. Notwithstanding anything in this Restated Certificate of
Incorporation to the contrary and in addition to any vote of the Board of
Directors required by this Restated Certificate of Incorporation, until the
occurrence of the Trigger Date (as defined below), the affirmative vote of the
holders of more than eighty percent (80%) of the voting power of the Common
Stock then outstanding shall be required to alter, amend or repeal, or adopt any
provision inconsistent with, any provision of this Article SEVENTH. Neither the
alteration, amendment or repeal of this Article SEVENTH nor the adoption of any
provision inconsistent with this
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Article SEVENTH shall eliminate or reduce the effect of this Article SEVENTH in
respect of any matter occurring, or any cause of action, suit or claim that, but
for this Article SEVENTH, would accrue or arise, prior to such alteration,
amendment, repeal or adoption.
"Trigger Date" shall mean the first date on which Travelers
ceases to beneficially own (excluding for such purposes shares of Common Stock
beneficially owned by Travelers but not for its own account, including (in such
exclusion) beneficial ownership which arises by virtue of some entity that is an
affiliate of Travelers (as hereinafter defined) being a sponsor or advisor of a
mutual or similar fund that beneficially owns shares of Common Stock) twenty
percent (20%) or more of the voting power of the then outstanding Common Stock.
EIGHTH: A. In anticipation that (i) the Corporation and
Travelers may enter into contracts or otherwise transact business with each
other and that the Corporation may derive benefits therefrom and (ii) the
Corporation may from time to time enter into contractual, corporate or business
relations with one or more of its directors, or one or more corporations,
partnerships, associations or other organizations in which one or more of its
directors have a financial interest (collectively, "Related Entities"), the
provisions of this Article EIGHTH are set forth to regulate and define certain
contractual relations and other business relations of the Corporation as they
may involve Travelers, Related Entities and their respective officers and
directors, and the powers, rights, duties and liabilities of the Corporation and
its officers, directors and stockholders in connection therewith. The provisions
of this Article EIGHTH are in addition to, and not in limitation of, the
provisions of the GCL and the other provisions of this Restated Certificate of
Incorporation. Any contract or business relation which does not comply with the
procedures set forth in this Article EIGHTH shall not by reason thereof be
deemed void or voidable or result in any breach of any fiduciary duty or duty of
loyalty or failure to act in good faith or in the best interests of the
Corporation or derivation of any improper personal benefit, but shall be
governed by the provisions of this Restated Certificate of Incorporation, the
By-Laws, the GCL and other applicable law.
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B. No contract, agreement, arrangement or transaction between
the Corporation and Travelers or between the Corporation and one or more of the
directors or officers of the Corporation, Travelers or any Related Entity or
between the Corporation and any Related Entity shall be void or voidable solely
for the reason that Travelers, any Related Entity or any one or more of the
officers or directors of the Corporation, Travelers or any Related Entity are
parties thereto, or solely because any such directors or officers are present at
or participate in the meeting of the Board of Directors or committee thereof
which authorizes the contract, agreement, arrangement or transaction, or solely
because his or their votes are counted for such purpose, and Travelers, any
Related Entity and such directors and officers (a) shall have fully satisfied
and fulfilled their fiduciary duties to the Corporation and its stockholders
with respect thereto, (b) shall not be liable to the Corporation or its
stockholders for any breach of fiduciary duty by reason of the entering into,
performance or consummation of any such contract, agreement, arrangement or
transaction, (c) shall be deemed to have acted in good faith and in a manner
such persons reasonably believe to be in and not opposed to the best interests
of the Corporation for purposes of Article TWELFTH and the other provisions of
this Restated Certificate of Incorporation and (d) shall be deemed not to have
breached their duties of loyalty to the Corporation and its stockholders and not
to have derived an improper personal benefit therefrom for the purposes of
Article TWELFTH and the other provisions of this Restated Certificate of
Incorporation, if:
(i) the material facts as to the contract, agreement,
arrangement or transaction are disclosed or are known to the Board of
Directors or the committee thereof that authorizes the contract,
agreement, arrangement or transaction, and the Board of Directors or
such committee in good faith authorizes the contract, agreement,
arrangement or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be
less than a quorum; or
(ii) the material facts as to the contract, agreement,
arrangement or transaction are disclosed or are known to the holders of
16
<PAGE> 17
Common Stock entitled to vote thereon, and the contract, agreement,
arrangement or transaction is specifically approved in good faith by
vote of the holders of a majority of the voting power of the Common
Stock then outstanding not owned by Travelers or a Related Entity, as
the case may be.
C. Directors of the Corporation who are also directors or
officers of Travelers or any Related Entity may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract, agreement, arrangement or transaction. Common
Stock owned by Travelers and any Related Entities may be counted in determining
the presence of a quorum at a meeting of stockholders which authorizes the
contract, agreement, arrangement or transaction.
D. Any person or entity purchasing or otherwise acquiring any
interest in any shares of capital stock of the Corporation will be deemed to
have notice of and to have consented to the provisions of this Article EIGHTH.
E. For purposes of this Article EIGHTH, Travelers shall have
the meaning set forth in Article SEVENTH.
F. For purposes of this Article EIGHTH, any contract,
agreement, arrangement or transaction with any corporation, partnership, joint
venture, limited liability companies, trusts, association or other entity in
which the Corporation owns (directly or indirectly) fifty percent (50%) or more
of the outstanding voting stock, voting power, partnership interests or similar
ownership interests, or with any officer or director thereof, shall be deemed to
be a contract, agreement, arrangement or transaction with the Corporation.
G. Notwithstanding anything in this Restated Certificate of
Incorporation to the contrary and in addition to any vote of the Board of
Directors required by this Restated Certificate of Incorporation, until the
occurrence of the Trigger Date, the affirmative vote of the holders of more than
eighty percent (80%) of the voting power of the Common Stock then outstanding
shall
17
<PAGE> 18
be required to alter, amend or repeal, or adopt any provision inconsistent with,
any provision of this Article EIGHTH. Neither the alteration, amendment or
repeal of this Article EIGHTH nor the adoption of any provision inconsistent
with this Article EIGHTH shall eliminate or reduce the effect of this Article
EIGHTH in respect of any matter occurring, or any cause of action, suit or claim
that, but for this Article EIGHTH, would accrue or arise, prior to such
alteration, amendment, repeal or adoption.
NINTH: A. In anticipation that Travelers will remain a
stockholder of the Corporation and may have continued contractual, corporate and
business relations with the Corporation, the provisions of this Article NINTH
are set forth to regulate and define the conduct of certain affairs of the
Corporation as they may impact Travelers and its legal and regulatory status.
B. The Corporation shall not, without the written consent of
Travelers, engage, directly or indirectly, in any act or activity which would
result, either alone or giving effect to the business, operations, properties,
activities and legal and regulatory status of Travelers and the Corporation, in
(a) Travelers being required to file any notice, report or other document or
make any registration with, obtain any approval, consent or authorization of or
otherwise become subject to any statutes, rules, regulations, ordinances,
orders, decrees or other legal restrictions of any federal, state, local or
foreign governmental, administrative or regulatory authority, agency or
instrumentality (collectively, "Applicable Law") or (b) any director of the
Corporation who is also a director or officer of Travelers being ineligible to
serve or prohibited from so serving as a director of the Corporation under or
pursuant to any Applicable Law. Travelers shall not be liable to the Corporation
or its stockholders for breach of any fiduciary duty by reason of the fact that
Travelers gives or withholds any consent for any reason in connection with this
Article NINTH. No vote cast or other action taken by any person who is an
officer, director or other representative of Travelers which vote is cast or
action is taken by such person in his capacity as a director of this Corporation
shall constitute a consent of Travelers for the purpose of this Article NINTH.
18
<PAGE> 19
C. Any person or entity purchasing or otherwise acquiring any
interest in shares of capital stock of the Corporation shall be deemed to have
notice of and to have consented to the provisions of this Article NINTH.
D. For purposes of this Article NINTH, Travelers shall have
the meaning set forth in Article SEVENTH.
E. For purposes of Section B of this Article NINTH, only the
consent of Travelers Group Inc. (and not any such corporation, partnership,
joint venture, limited liability company, trust, association or other entity)
shall be required.
F. Notwithstanding anything in this Restated Certificate of
Incorporation to the contrary and in addition to any vote of the Board of
Directors required by this Restated Certificate of Incorporation, until the
occurrence of the Trigger Date, the affirmative vote of the holders of more than
eighty percent (80%) of the voting power of the Common Stock then outstanding
shall be required to alter, amend or repeal, or adopt any provision inconsistent
with, any provision of this Article NINTH. Neither the alteration, amendment or
repeal of this Article NINTH nor the adoption of any provision inconsistent with
this Article NINTH shall eliminate or reduce the effect of this Article NINTH in
respect of any matter occurring, or any cause of action, suit or claim that, but
for this Article NINTH, would accrue or arise, prior to such alteration,
amendment, repeal or adoption.
G. This Article NINTH shall become inoperative and of no
effect on and after the date six months following the Trigger Date.
TENTH: Following the consummation of an initial public
offering of Common Stock or any transaction or event as a result of which any
Common Stock is listed on a national securities exchange or registered under
Section 12 of the Securities Exchange Act of 1934, as amended, any action
required or permitted to be taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of stockholders of the
Corporation, and the ability of the stockholders to consent in writ-
19
<PAGE> 20
ing to the taking of any action is hereby specifically denied; provided,
however, stockholders of the Corporation shall have the right to consent in
writing to the taking of action by the Corporation in connection with a change
in the Corporation's name from "Travelers/Aetna Property Casualty Corp." Except
as otherwise required by law, special meetings of stockholders of the
Corporation may be called only by (i) the Chairman of the Board, the Vice
Chairman, Chairman of the Executive Committee, the President or the Secretary of
the Corporation or (ii) any such officer at the request in writing of the Board
of Directors or of the Executive Committee.
ELEVENTH: In furtherance and not in limitation of the powers
conferred upon it by the laws of the State of Delaware, the Board of Directors
shall have the power to adopt, amend, alter or repeal the Corporation's By-Laws.
The affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of
the entire Board of Directors shall be required to adopt, amend, alter or repeal
the Corporation's By-Laws. Notwithstanding any other provisions of this Restated
Certificate of Incorporation or the By-Laws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law, this Restated Certificate of Incorporation or the By-Laws of
the Corporation), the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of the shares entitled to vote at an election of
directors shall be required to adopt, amend, alter or repeal, or adopt any
provision as part of this Restated Certificate of Incorporation inconsistent
with the purpose and intent of, this Article ELEVENTH.
TWELFTH: No director or officer of the Corporation shall be
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director or officer, except for liability (i) for any breach
of the director's or officer's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
THIRTEENTH: In accordance with Section 203(b)(3) of the GCL,
the Corporation expressly elects not to be governed by Section 203 of the GCL.
20
<PAGE> 21
FOURTEENTH: Except as provided in Articles FOURTH, FIFTH and
ELEVENTH of this Restated Certificate of Incorporation, the Corporation reserves
the right to amend and repeal any provision contained in this Restated
Certificate of Incorporation in the manner prescribed by the laws of the State
of Delaware, and all rights of stockholders shall be subject to this
reservation.
21
<PAGE> 22
THE UNDERSIGNED, being the Vice President and Secretary of the
Corporation, does hereby certify that the Corporation has restated its
Certificate of Incorporation as set forth above, does hereby certify that such
restatement has been duly adopted in accordance with the applicable provisions
of Sections 242 and 245 of the General Corporation Law of the State of Delaware,
and does hereby make and file this Restated Certificate of Incorporation.
Dated: March 29, 1996
/s/ Charles O. Prince, III
--------------------------------
Charles O. Prince, III
Vice President and Secretary
22
<PAGE> 23
Certificate of Designations, Powers,
Preferences and Rights
of the
7.5% Redeemable Preferred Stock, Series Z
($250,000 liquidation preference per share)
of
Travelers/Aetna Property Casualty Corp.
--------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
--------------------------------------------
Travelers/Aetna Property Casualty Corp., a Delaware
corporation (the "Corporation"), hereby certifies that:
1. The Restated Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation") fixes the total number of
shares of all classes of capital stock that the Corporation shall have the
authority to issue at 700,000,000 shares of Class A common stock, par value $.01
per share, 700,000,000 shares of Class B common stock, par value $.01 per share,
and 25,000,000 shares of preferred stock, par value $0.10 per share ("Preferred
Stock").
2. The Certificate of Incorporation expressly grants to the
Board of Directors of the Corporation authority to provide for the issuance of
the shares of Preferred Stock in series, and to establish from time to time the
number of shares to be included in each such series and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board of
Directors, by action duly taken on March 29, 1996, adopted resolutions providing
for the 7.5% Redeemable Preferred Stock, Series Z as follows:
<PAGE> 24
"RESOLVED, that an issue of a series of Preferred
Stock is hereby provided for, and the number of shares to be included
in such series is established, and the designation, powers, preferences
and rights and qualifications, limitations and restrictions of such
series are fixed hereby as follows:
1. Designation and Number of Shares. The designation
of such series shall be 7.5% Redeemable Preferred Stock, Series Z (the
"Series Z Preferred Stock"), and the number of shares constituting such
series shall be 2,160. Shares of the Series Z Preferred Stock shall
have a par value of $0.10 per share, and a liquidation preference of
$250,000 per share (the "Liquidation Preference"). The number of
authorized shares of Series Z Preferred Stock may be reduced (but not
below the number of shares thereof then outstanding) by further
resolution duly adopted by the Board of Directors or the Executive
Committee of the Board of Directors and by the filing of a certificate
pursuant to the provisions of the General Corporation Law of the State
of Delaware stating that such reduction has been so authorized, but the
number of authorized shares of Series Z Preferred Stock shall not be
increased.
2. Dividends. (a) Holders of shares of Series Z
Preferred Stock will be entitled to receive, when, as and if declared
by the Board of Directors or a duly authorized committee thereof (the
"Board of Directors") out of assets of the Corporation legally
available for payment, cash dividends payable quarterly at the Annual
Dividend Rate (as defined below) per annum. Dividends on the Series Z
Preferred Stock shall be payable with respect to each three month
period beginning on the last day of March, June, September and December
of each year and ending on the day immediately prior to the first day
of the next succeeding three month period (each, a "Quarterly Dividend
Period"), in arrears, payable on March 31, June 30, September 30 and
December 31 of each year, commencing June 30, 1996, provided that if
such day is not a Business Day (as hereinafter defined), such dividend
shall be paid on the next succeeding Business Day (each, a
2
<PAGE> 25
"Dividend Payment Date"). Dividends shall be fully cumulative from the
date of initial issuance of such shares. Dividends shall be paid to the
holders of record of shares of the Series Z Preferred Stock as they
appear on the books of the Corporation at the close of business on the
15th day immediately preceding the applicable Dividend Payment Date (or
if such day is not a Business Day, the applicable record date shall be
the next preceding day that is a Business Day). Dividends in arrears
for any past Quarterly Dividend Periods may be declared and paid at any
time, without reference to any regular Dividend Payment Date, to
holders of record on such date, not exceeding 45 days preceding the
payment date thereof, as may be fixed by the Board of Directors.
The amount of dividends payable for each full
Quarterly Dividend Period in respect of each share of Series Z
Preferred Stock shall be equal to the product of (i) $62,500 multiplied
by (ii) the Annual Dividend Rate. The amount of dividends payable in
respect of each share of Series Z Preferred Stock for the initial
dividend period or any period shorter than a full Quarterly Dividend
Period shall be equal to the result obtained by multiplying (x) the
Annual Dividend Rate times (y) the Liquidation Preference times (z) a
fraction, the numerator of which is the actual number of days elapsed
in such period and the denominator of which is 360.
(b) "Annual Dividend Rate" means 0.075.
(c) "Business Day" means any day that is not a
Saturday, Sunday or a legal holiday in the State of New York.
(d) No dividends may be declared or paid or set apart
for payment on any Parity Preferred Stock (as defined in paragraph 8(b)
below) with regard to the payment of dividends unless (i) there shall
also be or have been declared and paid or set apart for payment on the
Series Z Preferred Stock, full cumulative dividends for all dividend
payment periods of the Series Z Preferred Stock ending on or before the
dividend payment date of such Parity Preferred Stock, ratably in
proportion to the re-
3
<PAGE> 26
spective amounts of dividends (x) accumulated and unpaid or payable on
such Parity Preferred Stock, on the one hand, and (y) accumulated and
unpaid through the dividend payment period or periods of the Series Z
Preferred Stock next preceding such dividend payment date, on the other
hand, and (ii) the Corporation is not in default with respect to any
obligation (including its obligations pursuant to Sections 3 and 4
hereof) to redeem shares of the Series Z Preferred Stock.
(e) Except as set forth in the preceding paragraph
(d), unless (i) full cumulative dividends on the Series Z Preferred
Stock have been paid through the most recent Dividend Payment Date and
(ii) the Corporation is not in default with respect to any obligation
(including its obligations pursuant to Sections 3 and 4 hereof) to
redeem shares of the Series Z Preferred Stock, no dividends (other than
in Common Stock (as defined below)) may be paid or declared and set
aside for payment or other distribution made upon the Corporation's
Class A Common Stock, par value $.01 per share ("Class A Common
Stock"), Class B Common Stock, par value $.01 per share (together with
the Class A Common Stock, the "Common Stock"), or on any other stock of
the Corporation ranking junior to or on a parity with the Series Z
Preferred Stock as to dividends, nor may any Common Stock or any other
stock of the Corporation ranking junior to or on a parity with the
Series Z Preferred Stock as to dividends or as to amounts distributable
upon liquidation, dissolution or winding up of the Corporation be
redeemed, purchased or otherwise acquired for any consideration (or any
payment be made to or available for a sinking fund for the redemption
of any shares of such stock) by the Corporation; provided that any such
junior or parity stock may, in accordance with their respective
provisions, be converted into or exchanged or redeemed solely for stock
of the Corporation ranking junior to the Series Z Preferred Stock as to
dividends and as to amounts distributable upon liquidation, dissolution
or winding up of the Corporation.
3. Optional Redemption. (a) The Corporation, at its
option, out of funds legally avail-
4
<PAGE> 27
able therefor, may redeem shares of the Series Z Preferred Stock, in
whole or in part, on any Dividend Payment Date on or after June 30,
2002, at a redemption price of $250,000 per share, plus an amount equal
to accrued and unpaid dividends (whether or not earned or declared)
thereon to, but excluding, the date fixed for redemption.
(b) In the event that fewer than all the outstanding
shares of the Series Z Preferred Stock are to be redeemed, the shares
to be redeemed from each holder of record shall be determined by lot or
pro rata as may be determined by the Board of Directors or by any other
method as may be determined by the Board of Directors in its sole
discretion to be equitable.
(c) In the event the Corporation elects to redeem
shares of the Series Z Preferred Stock, written notice of such
redemption shall be given by first class mail, postage prepaid, mailed
not less than 30 days and not more than 60 days prior to the redemption
date, to each holder of record of the shares to be redeemed, at such
holder's address as the same appears on the books of the Corporation.
Each such notice shall state: (i) the redemption date; (ii) the number
of shares of the Series Z Preferred Stock to be redeemed and, in the
case of a partial redemption pursuant to paragraph 3(b) hereof, the
identification (by the number of the certificate or otherwise) of the
shares of Series Z Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such shares are
to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue from and
after such redemption date. On such redemption date, the Corporation
shall pay the redemption price, plus an amount equal to all accrued and
unpaid dividends thereon (whether or not earned or declared), to the
holders of Series Z Preferred Stock so to be redeemed.
(d) If notice of redemption shall have been duly
given, and if, on or before the redemption date specified therein, all
funds necessary for such redemption shall have been set aside by the
Corpora-
5
<PAGE> 28
tion, separate and apart from its other funds, in trust for the pro
rata benefit of the holders of the shares of Series Z Preferred Stock
called for redemption, so as to be and continue to be available
therefor, then, notwithstanding that any certificate for shares so
called for redemption shall not have been surrendered for cancellation,
all shares so called for redemption shall no longer be deemed
outstanding on and after such redemption date, all dividends shall
cease to accrue from and after such redemption date, and all rights
with respect to such shares shall forthwith on such redemption date
cease and terminate, except only the right of the holders thereof to
receive the amount payable on redemption thereof, without interest.
If such notice of redemption shall have been duly
given or if the Corporation shall have given to the bank or trust
company hereinafter referred to irrevocable authorization promptly to
give such notice, and if on or before the redemption date specified
therein the funds necessary for such redemption shall have been
deposited by the Corporation with such bank or trust company in trust
for the pro rata benefit of the holders of the shares called for
redemption, then, notwithstanding that any certificate for shares so
called for redemption shall not have been surrendered for cancellation,
from and after the time of such deposit, all shares so called for
redemption shall no longer be deemed to be outstanding and all rights
with respect to such shares shall forthwith cease and terminate, except
only the right of the holders thereof to receive from such bank or
trust company at any time after the time of such deposit the funds so
deposited, without interest. The aforesaid bank or trust company shall
be a bank or trust company organized and in good standing under the
laws of the United States of America or of the State of New York, doing
business in the Borough of Manhattan, the City of New York, having
capital surplus and undivided profits aggregating at least $50,000,000
according to its latest published statement of condition, and shall be
identified in the notice of redemption. Any interest accrued on such
funds shall be for the benefit of the Corporation. Any funds so set
aside or deposited, as the case may be, and unclaimed at
6
<PAGE> 29
the end of one year from such redemption date shall, to the extent
permitted by law, be released or repaid to the Corporation, after which
repayment the holders of the shares so called for redemption shall look
only to the Corporation for payment thereof.
(e) Notwithstanding the foregoing provisions of this
Section 3, unless the full cumulative dividends on all outstanding
shares of the Series Z Preferred Stock shall have been paid or
contemporaneously are declared and paid through the most recent
Dividend Payment Date, no shares of the Series Z Preferred Stock shall
be redeemed unless all outstanding shares of the Series Z Preferred
Stock are simultaneously redeemed, and neither the Corporation nor a
subsidiary of the Corporation shall purchase or otherwise acquire any
shares of the Series Z Preferred Stock.
(f) Any shares of the Series Z Preferred Stock that
shall at any time have been redeemed or repurchased pursuant to this
Section 3 or otherwise shall, after such redemption or repurchase, have
the status of authorized but unissued shares of Preferred Stock,
without designation as to class or series until such shares are once
again designated as part of a particular class or series by the Board
of Directors.
4. Mandatory Redemption. (a) Any holder of shares of
Series Z Preferred Stock that is a member of the Travelers Affiliated
Group (as defined below) shall have the right, subject to paragraph (b)
below, to require the Corporation, at any time, to repurchase, out of
funds legally available therefore on the date specified in the notice
duly given by such holder to the Corporation pursuant to paragraph (c)
below (the "Mandatory Redemption Date"), all or part of the Series Z
Preferred Stock then owned by such holder at a purchase price in cash
equal to 100% of the aggregate Liquidation Preference of such shares,
together with all accrued and unpaid dividends (whether or not earned
or declared) on such shares to but not including the Mandatory
Redemption Date (the "Redemption Price"), in accordance with the
procedures set forth below. "Travelers Affiliated Group" means
Travelers Group
7
<PAGE> 30
Inc., a Delaware corporation, and all of its direct and indirect
subsidiaries now or hereafter existing, other than the Corporation and
its direct and indirect subsidiaries.
(b) The aggregate amount of Series Z Preferred Stock
required to be redeemed by the Corporation on any Mandatory Redemption
Date pursuant to the provisions of paragraph (a) above will be limited
to the Applicable Amount as of such Mandatory Redemption Date. The
"Applicable Amount," as of any date, means an amount equal to the
aggregate net proceeds (regardless of the actual use of such proceeds)
received by the Corporation or a subsidiary of the Corporation, after
the date of issuance of the Series Z Preferred Stock to and including
such Mandatory Redemption Date, from any issuance and sale by the
Corporation or a subsidiary of the Corporation of shares of its capital
stock (or, in the case of a subsidiary trust of the Corporation,
beneficial interests in the trust) (other than offerings pursuant to
employee plans, or non-cash offerings in connection with an
acquisition, exchange offer, recapitalization or similar transaction)
(a "Stock Issuance"), less the aggregate Liquidation Preference of all
shares of Series Z Preferred Stock redeemed by the Corporation pursuant
to the provisions of this Section 4 prior to such Mandatory Redemption
Date; provided, however, that the Applicable Amount shall not include
proceeds received by the Corporation from the issuance and sale of
shares of Common Stock to The Travelers Insurance Group Inc., Aetna
Life and Casualty Company, J.P. Morgan Capital Corporation, The Trident
Partnership L.P. and Fund American Enterprises Holdings, Inc. pursuant
to those separate stock purchase agreements with the Corporation, each
dated as of March 11, 1996. The Corporation shall be obligated to
redeem shares of Series Z Preferred Stock only to the extent that it
has funds legally available therefor.
(c) The Corporation shall provide written notice to
the holders of record of shares of Series Z Preferred Stock of the
Applicable Amount as of the date of such notice and after giving effect
to any Stock Issuance, (i) on the first day of each calendar month
following the date of initial issuance of
8
<PAGE> 31
the Series Z Preferred Stock and (ii) at any time the Corporation or a
subsidiary of the Corporation intends to make a Stock Issuance (but in
no event later than the fifth Business Day prior to the consummation of
any such issuance and sale); provided, however, that the Corporation's
failure to give such notice shall in no way affect its obligation to
redeem the shares of Series Z Preferred Stock as provided in this
Section 4. Any holder who desires to cause the Corporation to redeem
such holder's shares of Series Z Preferred Stock shall send by
first-class mail, postage prepaid, or by hand delivery, to the
Corporation at its principal executive offices, not less than two
Business Days nor more than 60 days prior to the Mandatory Redemption
Date specified in such notice, a notice stating (i) that such holder
desires to cause the Corporation to redeem such holder's shares of
Series Z Preferred Stock, (ii) the number of shares to be redeemed and
(iii) the Mandatory Redemption Date (which date may be specified by
reference to the estimated closing date of any proposed Stock
Issuance). Holders electing to have shares of the Series Z Preferred
Stock redeemed will be required to surrender the certificate or
certificates representing such shares to the Corporation at least one
full Business Day prior to such Mandatory Redemption Date, and on such
Mandatory Redemption Date the Corporation shall pay to such holder the
Redemption Price.
(d) Any shares of Series Z Preferred Stock that shall
at any time have been redeemed or repurchased pursuant to this Section
4 or otherwise shall, after such redemption or repurchase, have the
status of authorized but unissued shares of Preferred Stock, without
designation as to class or series until such shares are once again
designated as part of a particular class or series by the Board of
Directors.
(e) If fewer than all the shares of Series Z
Preferred Stock requested to be redeemed are required to be redeemed as
a result of the provisions of paragraph (b) above, then the Corporation
will select those shares to be redeemed by lot or pro rata as may be
determined by the Board of Directors or by any other method as may be
deter-
9
<PAGE> 32
mined by the Board of Directors in its sole discretion to be
equitable.
(f) The provisions of this Section 4 shall
automatically terminate and shall cease to have any further force or
effect with respect to, but only with respect to, any shares of Series
Z Preferred Stock that are transferred to a person other than a member
of the Travelers Affiliated Group. For purposes of this Section 4,
"person" shall mean a corporation, a trust, a limited liability
company, an association, a partnership, a joint venture, an
organization, a business, an individual, a government or a subdivision
thereof or a governmental agency; and the term "transfer" shall not
include a bona fide pledge of shares of Series Z Preferred Stock.
(g) Notwithstanding the foregoing provisions of this
Section 4, unless the full cumulative dividends on all outstanding
shares of the Series Z Preferred Stock shall have been paid or
contemporaneously are declared and paid through the most recent
Dividend Payment Date, no shares of the Series Z Preferred Stock shall
be redeemed unless all outstanding shares of the Series Z Preferred
Stock are simultaneously redeemed, and neither the Corporation nor a
subsidiary of the Corporation shall purchase or otherwise acquire any
shares of the Series Z Preferred Stock.
5. Conversion or Exchange; Sinking Fund. The holders
of shares of the Series Z Preferred Stock shall not have any rights to
convert such shares into, or exchange such shares for, shares of any
other class or classes or of any other series of any class or classes
of capital stock of the Corporation; nor shall the holders of shares of
the Series Z Preferred Stock be entitled to the benefits of a sinking
fund in respect of their shares of the Series Z Preferred Stock.
6. Voting. (a) Except as otherwise provided in this
Section 6 or as otherwise required by law, the Series Z Preferred Stock
shall have no voting rights.
10
<PAGE> 33
(b) If the equivalent of six quarterly dividends
(whether or not consecutive) payable on shares of Series Z Preferred
Stock or on any Parity Preferred Stock upon which like voting rights
have been conferred and are exercisable are in arrears at the time of
the record date to determine stockholders for any annual meeting of
stockholders of the Corporation, the authorized number of directors of
the Corporation shall be automatically increased by two, and the
holders of shares of Series Z Preferred Stock (voting separately as a
class with the holders of shares of any one or more other series of
Parity Preferred Stock outstanding at the time upon which like voting
rights have been conferred and are exercisable ("Voting Parity Stock"))
shall be entitled at such annual meeting of stockholders (and at each
subsequent annual meeting of stockholders until such arrearages have
been paid or set apart for payment, at which time such right shall
terminate, except as herein or by law expressly provided, subject to
revesting in the event of each and every subsequent default of the kind
referred to above) to elect two directors of the Corporation, with the
remaining directors of the Corporation to be elected by the holders of
shares of any other class or classes or series of stock entitled to
vote therefor. In any such election, holders of shares of Series Z
Preferred Stock shall have 10,000 votes for each share held (the
holders of shares of any other class or Series of Voting Parity Stock
being entitled to such number of votes, if any, for each share of such
stock held as may be granted to them).
At all meetings of stockholders at which holders of
Preferred Stock shall be entitled to vote for Directors as a single
class, the holders of a majority of the outstanding shares of all
classes and series of capital stock of the Corporation having the right
to vote as a single class shall be necessary to constitute a quorum,
whether present in person or by proxy, for the election by such single
class of its designated Directors. In any election of Directors by
stockholders voting as a class, such Directors shall be elected by the
vote of at least a plurality of shares held by such stockholders
present or represented at the meeting. At any such meeting, the
election of Directors by stockholders
11
<PAGE> 34
voting as a class shall be valid notwithstanding that a quorum of other
stockholders voting as one or more classes may not be present or
represented at such meeting.
(c) Any director who has been so elected pursuant to
the preceding paragraph (b) may be removed at any time, with or without
cause, only by the affirmative vote of the holders of the shares at the
time entitled to cast a majority of the votes entitled to be cast for
the election of any such director at a special meeting of such holders
called for that purpose, and any vacancy thereby created may be filled
by the vote of such holders. If a vacancy occurs among the Directors
elected pursuant to the preceding paragraph (b), other than by removal
from office as set forth in the preceding sentence, such vacancy may be
filled by the remaining Director elected pursuant to the preceding
paragraph (b), or his or her successor then in office, and the Director
so elected to fill such vacancy shall serve until the next meeting of
stockholders for the election of Directors.
(d) The voting rights of the holders of Series Z
Preferred Stock to elect Directors as set forth above shall continue
until all dividend arrearages on the Series Z Preferred Stock have been
paid or declared and set apart for payment. Upon the termination of
such voting rights, the terms of office of all persons who may have
been elected pursuant to such voting rights shall immediately
terminate, and the number of directors of the Corporation shall be
decreased by two.
(e) So long as any shares of Series Z Preferred Stock
remain outstanding, the consent of the holders of at least two-thirds
of the shares of Series Z Preferred Stock then outstanding, given in
person or by proxy, in writing or at any meeting called for the
purpose, shall be necessary to permit, effect or validate the
following:
i) the creation, issuance or increase in
the authorized amount of any class or series of stock ranking
prior to the shares of Series Z Preferred Stock either as to
dividends
12
<PAGE> 35
or upon liquidation, dissolution or winding up of the
Corporation; or
ii) an alteration or change in the
provisions of the Restated Certificate of Incorporation of the
Corporation (including any Certificate of Amendment or
Certificate of Designations relating to the Series Z Preferred
Stock) that would adversely affect the powers, preferences or
rights of the holders of shares of Series Z Preferred Stock;
provided, however, that any increase in the amount of
authorized Common Stock or authorized Preferred Stock or any
increase or decrease in the number of shares of any series of
Preferred Stock or the authorization, creation and issuance of
other classes or series of stock, in each case ranking on a
parity with or junior to the Series Z Preferred Stock with
respect to the payment of dividends and as to the distribution
of assets upon liquidation, dissolution or winding up, shall
not be deemed to adversely affect such powers, preferences or
rights.
(f) The foregoing voting provisions shall not apply
if, at or prior to the time when the act with respect to which such
vote would otherwise be required or upon which the holders of Series Z
Preferred Stock shall be entitled to vote shall be effected, all
outstanding shares of Series Z Preferred Stock shall have been redeemed
or called for redemption and sufficient funds shall have been deposited
in trust to effect such redemption.
7. Liquidation Rights. (a) Upon the dissolution,
liquidation or winding up of the Corporation, the holders of the shares
of the Series Z Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders,
whether from capital, surplus or earnings, before any payment or
distribution shall be made on the Common Stock or on any other class or
series of stock ranking junior to shares of the Series Z Preferred
Stock as to amounts distributable on dissolution, liquidation or
winding up, $250,000 per share, plus an amount equal to all dividends
(whether or not earned or declared) on
13
<PAGE> 36
such shares accrued and unpaid thereon to the date of final
distribution.
(b) Neither the merger or consolidation of the
Corporation into or with any other corporation nor the merger or
consolidation of any other corporation into or with the Corporation,
nor a sale or transfer of all or any part of the Corporation's assets,
shall be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, of the Corporation for the purpose of this
Section 7.
(c) After the payment to the holders of the shares of
the Series Z Preferred Stock of the full preferential amounts provided
for in this Section 7, the holders of the Series Z Preferred Stock as
such shall have no right or claim to any of the remaining assets of the
Corporation.
(d) In the event the assets of the Corporation
available for distribution to the holders of shares of the Series Z
Preferred Stock upon any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, shall be insufficient to
pay in full all amounts to which such holders are entitled pursuant to
paragraph (a) of this Section 7, the holders of shares of the Series Z
Preferred Stock and of any Parity Preferred Stock or any other stock of
the Corporation ranking, as to the amounts distributable upon
dissolution, liquidation or winding up, on a parity with the Series Z
Preferred Stock, shall share ratably in any distribution in proportion
to the full respective preferential amounts to which they are entitled.
8. Ranking. For purposes of this Resolution, any
stock of any class or classes or series of the Corporation shall be
deemed to rank:
(a) prior to the shares of Series Z Preferred Stock,
either as to dividends or upon liquidation, dissolution or winding up
if the holders of such stock shall be entitled to either the receipt of
dividends or of amounts distributable upon dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, as
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<PAGE> 37
the case may be, in preference or priority to the holders of shares of
the Series Z Preferred Stock;
(b) on a parity with shares of the Series Z Preferred
Stock, either as to dividends or upon liquidation, dissolution or
winding up, or both, whether or not the dividend rates, dividend
payment dates, redemption amounts per share or liquidation values per
share or sinking fund provisions, if any, are different from those of
the Series Z Preferred Stock, if the holders of such stock shall be
entitled by the terms thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, as the case may be, in
proportion to their respective dividend rates or liquidation values,
without preference or priority of one over the other, as between the
holders of such stock and the holders of shares of Series Z Preferred
Stock (the term "Parity Preferred Stock" being used to refer to any
stock on a parity with the shares of Series Z Preferred Stock, either
as to dividends or upon liquidation, dissolution or winding up, or
both, as the context may require); and
(c) junior to shares of the Series Z Preferred Stock,
as to dividends and upon liquidation, dissolution or winding up, or
both, if such stock shall be Common Stock or if the holders of shares
of the Series Z Preferred Stock shall be entitled to receipt of
dividends and of amounts distributable upon dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, as the
case may be, in preference or priority to the holders of such stock.
9. Waiver, Modification and Amendment.
Notwithstanding any other provisions relating to the Series Z Preferred
Stock, any of the rights or benefits of the holders of the Series Z
Preferred Stock may be waived, modified or amended with the consents of
the holders of all of the then outstanding shares of Series Z Preferred
Stock. Any such waiver, modification or amendment, shall be deemed to
have the same effect as satisfaction in full of any such right or
benefit as though actually received by such holders."
15
<PAGE> 38
Travelers/Aetna Property Casualty Corp. has caused this
Certificate to be duly executed by its Vice President and Secretary this 29th
day of March, 1996.
Travelers/Aetna
Property Casualty Corp.
By: /s/ Charles O. Prince, III
------------------------------------
Charles O. Prince, III
Vice President and
Secretary
16
<PAGE> 39
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION OF
TRAVELERS/AETNA PROPERTY CASUALTY CORP.
-------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
-------------------
TRAVELERS/AETNA PROPERTY CASUALTY CORP., a Delaware corporation (the
"Company"), does hereby certify as follows:
FIRST: Article FIRST of the Restated Certificate of Incorporation of
the Company is hereby amended to read in its entirety as set forth below:
FIRST: The name of the Corporation is Travelers Property Casualty Corp.
(hereinafter the "Corporation").
SECOND: The foregoing amendment has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware and by written consent of the holders of a majority of the stock of
the Corporation entitled to vote in accordance with Section 228 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed in its corporate name this 7th day of March, 1997.
TRAVELERS/AETNA PROPERTY CASUALTY CORP.
By: /S/ JAMES M. MICHENER
___________________________________________
James M. Michener
Secretary
<PAGE> 40
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION OF
TRAVELERS PROPERTY CASUALTY CORP.
-----------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
------------------------------
TRAVELERS PROPERTY CASUALTY CORP., a Delaware corporation (the
"Corporation") does hereby certify as follows:
FIRST: Article FIFTH is hereby amended to read in its entirety as
follows:
The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors, the exact number of
directors to be determined from time to time by resolution adopted by
affirmative vote of a majority of the entire Board of Directors. At
each annual meeting, each director shall be elected for a one-year
term. A director shall hold office until the annual meeting held in the
year in which his or her term expires and until his or her successor
shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. Any
vacancy on the Board of Directors that results from an increase in the
number of directors may be filled by a majority of the Board of
Directors then in office, provided that a quorum is present, and any
other vacancy occurring in the Board of Directors may be filled by a
majority of the directors then in office, subject to any contractual
provisions to the contrary, even if less than a quorum, or a sole
remaining director. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the
same remaining term as that of his or her predecessor. Notwithstanding
the foregoing, whenever the holders of any one or more classes or
series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships
shall be governed by the terms of this Restated Certificate of
Incorporation applicable thereto.
SECOND: The foregoing amendment has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, Travelers Property Casualty Corp. has caused this
certificate to be executed in its corporate name this 23rd day of April, 1997.
TRAVELERS PROPERTY CASUALTY CORP.
By: /s/ James M. Michener
_____________________________________
James M. Michener
Senior Vice President and Secretary
<PAGE> 1
RESTATED BY-LAWS
OF
TRAVELERS PROPERTY CASUALTY CORP.
(FORMERLY NAMED TRAVELERS/AETNA PROPERTY CASUALTY CORP.)
EFFECTIVE APRIL 23, 1997
<PAGE> 2
RESTATED BY-LAWS
OF
TRAVELERS PROPERTY CASUALTY CORP.
(FORMERLY NAMED TRAVELERS/AETNA PROPERTY CASUALTY CORP.)
(HEREINAFTER CALLED THE "COMPANY")
ARTICLE I
LOCATION
SECTION 1. The location of the registered office of the Company in
Delaware shall be in the City of Wilmington, County of New Castle, State of
Delaware.
SECTION 2. The Company shall, in addition to the registered office in
the State of Delaware, establish and maintain an office within or without the
State of Delaware or offices in such other places as the Board of Directors may
from time to time find necessary or desirable.
ARTICLE II
CORPORATE SEAL
SECTION 1. The corporate seal of the Company shall have inscribed
thereon the name of the Company and the year of its creation (1996) and the
words "Corporate Seal, Delaware."
ARTICLE III
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders, or any special
meeting thereof, shall be held at such place as may be designated by the Board
of Directors or by the Executive Committee, or by the officer or group of
Directors calling any special meeting.
SECTION 2. Stockholders entitled to vote may vote at all meetings
either in person or by proxy in writing. All proxies shall be filed with the
Secretary of the meeting before being voted upon.
SECTION 3. A majority in amount of the aggregate voting power of the
stock issued, outstanding and entitled to vote represented by the holders in
person or by proxy shall be requisite at all meetings to constitute a quorum for
the election of Directors or for the transaction
1
<PAGE> 3
of other business except as otherwise provided by law, by the Certificate of
Incorporation of the Company or by these By-laws. If at any annual or special
meeting of the stockholders, a quorum shall fail to attend, a majority in
interest attending in person or by proxy may adjourn the meeting from time to
time, not exceeding sixty days in all, without notice other than by announcement
at the meeting (except as otherwise provided herein) until a quorum shall attend
and thereupon any business may be transacted which might have been transacted at
the meeting originally called had the same been held at the time so called. If
the adjournment is for more than 30 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTION 4. The annual meeting of the stockholders shall be held on such
date and at such time as the Board of Directors or the Executive Committee may
determine by resolution. Except as otherwise set forth in the Certificate of
Incorporation of the Company, holders of the Class A common stock and the Class
B common stock shall vote together without regard to class, and every holder of
the outstanding shares of the Class A common stock shall be entitled to cast one
vote for each share of Class A common stock held by such stockholder and every
holder of the outstanding shares of the Class B common stock shall be entitled
to cast ten votes for each share of Class B common stock held by such
stockholder. All annual meetings shall be general meetings.
SECTION 5. The business to be transacted at the annual meeting shall
include the election of Directors, consideration and action upon the reports of
officers and Directors, the acts, contracts, transactions and proceedings of the
officers, Directors, Executive Committee, and all other Committees of the Board
and any other matters within the power of the Company which may be brought
before the meeting.
SECTION 6. Notice of the annual meeting shall be mailed by the
Secretary to each stockholder entitled to vote, at his or her last known post
office address, at least ten days but not more than sixty days prior to the
meeting.
SECTION 7. Special meetings of the stockholders may be called by the
Chairman of the Board, the Vice Chairman, the Chairman of the Executive
Committee, the President or the Secretary. A special meeting shall be called at
the request, in writing, of a majority of the Board of Directors or of the
Executive Committee, or by the vote of the Board of Directors or of the
Executive Committee.
SECTION 8. Notice of each special meeting, indicating briefly the
object or objects thereof, shall be mailed by the Secretary to each stockholder
entitled to vote at his or her last known post office address, at least ten days
but not more than sixty days prior to the meeting.
SECTION 9. If the entire Board of Directors becomes vacant, any
stockholder may call a special meeting in the same manner that the Chairman of
the Board may call such meeting, and Directors for the unexpired term may be
elected at said special meeting in the manner provided for their election at
annual meetings.
2
<PAGE> 4
ARTICLE IV
DIRECTORS
SECTION 1. The affairs, property and business of the Company shall be
managed and controlled by a Board of Directors, with the exact number of
directors to be determined from time to time by resolution adopted by
affirmative vote of a majority of the entire Board of Directors. The election
and term of directors shall be as provided in the Certificate of Incorporation
of the Company, as amended, from time to time.
SECTION 2. Vacancies in the Board of Directors shall be filled as
provided in the Certificate of Incorporation of the Company, as amended from
time to time.
SECTION 3. Stockholder proposals and stockholder nominations for the
election of directors at an annual meeting must, in order to be voted upon, be
made in writing and delivered to the Secretary of the Company at least 50 days
prior to the date of the meeting at which such nominations are proposed to be
voted upon or if less than 50 days' notice of a meeting of stockholders is
given, stockholder proposals and nominations must be delivered to the Secretary
of the Company no later than the close of business on the seventh day following
the day notice was mailed. Stockholder proposals and nominations for the
election of directors at a special meeting must be in writing and received by
the Secretary of the Company no later than the close of business on the tenth
day following the day on which notice of the meeting was mailed or public
disclosure of the date of the meeting was made, whichever occurs first. The
notice of stockholder nominations must set forth certain information with
respect to each nominee who is not an incumbent director.
ARTICLE V
POWERS OF THE DIRECTORS
SECTION 1. The Board of Directors shall have the management of the
business of the Company, and, in addition to the powers and authorities by these
By-laws expressly conferred upon them, may exercise all such powers and do all
such acts and things, as may be exercised or done by the Company, but subject,
nevertheless, to the provisions of the laws of the State of Delaware, of the
Certificate of Incorporation of the Company and of these By-laws.
SECTION 2. The Directors and members of the Executive Committee and
other committees appointed by the Board of Directors or by the Executive
Committee as such shall not
3
<PAGE> 5
receive any stated salary for their services except where authorized by the
Board of Directors, but, by resolution of the Board, a fixed sum and reasonable
expenses may be allowed for attendance at each regular or special meeting,
provided nothing herein contained shall be construed to preclude a Director or
member of a committee from serving in any other capacity and receiving
compensation therefor, but if he or she shall serve as an officer or employee of
the Company or of any subsidiary company, receiving a salary, he or she shall be
paid the actual expenses for attending meetings, but no other sums, except by
the express order of the Board of Directors.
SECTION 3. The Company shall indemnify, to the fullest extent
permissible under the General Corporation Law of the State of Delaware, or the
indemnification provisions of any successor statute, any person, and the heirs
and personal representatives of such person, against any and all judgments,
fines, amounts paid in settlement and costs and expenses, including attorneys'
fees, actually and reasonably incurred by or imposed upon such person in
connection with, or resulting from any claim, action, suit or proceeding (civil,
criminal, administrative or investigative) in which such person is a party or is
threatened to be made a party by reason of such person being or having been a
director, officer or employee of the Company, or of another corporation, joint
venture, trust or other organization in which such person serves as a director,
officer, employee or agent at the request of the Company, or by reason of such
person being or having been an administrator or a member of any board or
committee of this Company or of any such other organization, including, but not
limited to, any administrator, board or committee related to any employee
benefit plan.
The Company may advance expenses incurred in defending a civil or
criminal action, suit or proceeding to any such director, officer, employee or
agent upon receipt of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount, if it shall ultimately be determined
that such person is not entitled to indemnification by the Company.
The foregoing right of indemnification and advancement of expenses
shall in no way be exclusive of any other rights of indemnification to which any
such person may be entitled, under any by-law, agreement, vote of stockholders
or disinterested directors or otherwise, and shall inure to the benefit of the
heirs and personal representatives of such person.
SECTION 4. Each Director and officer and each member of any committee
designated by the Board of Directors shall, in the performance of his duties, be
fully protected in relying in good faith upon the books of account or other
records of the Company or of any of its subsidiaries, or upon reports made to
the Company or any of its subsidiaries by any officer of the Company or of a
subsidiary or by an independent certified public accountant or by an appraiser
selected with reasonable care by the Board of Directors or by any such
committee.
4
<PAGE> 6
ARTICLE VI
MEETINGS OF THE DIRECTORS
SECTION 1. The Board of Directors shall meet as soon as convenient
after the annual meeting of stockholders at such place as may be designated by
the Board of Directors or the Executive Committee, for the purpose of
organization and the transaction of any other business which may properly come
before the meeting.
SECTION 2. Regular meetings of the Directors may be held without notice
at such time and place as may be determined from time to time by resolution of
the Board.
SECTION 3. One-third of the total number of Directors shall constitute
a quorum except when the Board of Directors consists of one Director, then one
Director shall constitute a quorum for the transaction of business, but the
Directors present, though fewer than a quorum, may adjourn the meeting to
another day. The vote of the majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
SECTION 4. Special meetings of the Board may be called by the Board,
the Executive Committee, the Chairman of the Board, on one day's notice, or
other reasonable notice, to each Director, either personally, by mail or by
wire, and may be held at such time as the Board of Directors, the Executive
Committee or the officer calling said meeting may determine. Special meetings
may be called in like manner on the request in writing of three Directors. If
the Board of Directors or the Executive Committee so determine, such special
meetings may be held at some place other than at the office of the Company in
the City of Hartford.
SECTION 5. In the absence of both the Secretary and an Assistant
Secretary, the Board of Directors shall appoint a secretary to record all votes
and the minutes of its proceedings.
SECTION 6. Any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting, if a written consent to such action be signed by all of the members of
the Board of Directors or committee as the case may be, and such written consent
be filed with the minutes of the proceedings of the Board of Directors or such
committee.
SECTION 7. Unless otherwise provided by the Certificate of
Incorporation of the Company or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee by means of
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 7 shall constitute presence in person at such
meeting.
5
<PAGE> 7
ARTICLE VII
STANDING COMMITTEES
SECTION 1. The Board of Directors may designate from their number
standing committees and may invest them with all their own powers, except as
otherwise provided in the General Corporation Law of the State of Delaware,
subject to such conditions as they may prescribe, and all committees so
appointed shall keep regular minutes of their transactions and shall cause such
minutes to be recorded in books kept for that purpose in the office of the
Company, and shall report the same to the Board of Directors at their regular
meeting.
ARTICLE VIII
EXECUTIVE COMMITTEE
SECTION 1. The Board of Directors may designate an Executive Committee
of not more than ten nor fewer than two persons from among their own number.
One-third of the members of the Executive Committee shall constitute a quorum
except when the Executive Committee consists of two, then one member shall
constitute a quorum. Any vacancy on the Executive Committee shall be filled by
the Board of Directors.
SECTION 2. The Executive Committee shall exercise all powers of the
Board of Directors between the meetings of said Board except as otherwise
provided in the General Corporation Law of the State of Delaware. No action of
the Executive Committee shall become operative unless it has the affirmative
vote of at least a majority of the members of the Executive Committee present
and voting.
SECTION 3. Regular meetings of the Executive Committee shall be held
without notice at such time and place as may be determined from time to time by
resolution of the Executive Committee. Special meetings of the Executive
Committee may be called at any time upon one day's notice, or other reasonable
notice, either personally, by mail or by wire, by the Chairman of the Board, the
Chairman of the Executive Committee, or by any two members of the Executive
Committee.
SECTION 4. In the absence of both the Secretary and an Assistant
Secretary, the Executive Committee shall appoint a secretary who shall keep
regular minutes of the actions of the said Committee and report the same to the
Board of Directors, which thereupon shall take action thereon.
SECTION 5. The Board of Directors may designate from the members of the
Executive Committee a Chairman of the Executive Committee. If the Board of
Directors should
6
<PAGE> 8
not make such designation, the Executive Committee may designate a Chairman of
the Executive Committee.
ARTICLE IX
OFFICERS OF THE COMPANY
SECTION 1. The officers of the Company shall consist of a Chairman of
the Board of Directors, a President, a Vice Chairman, one or more Vice
Presidents, a Controller, a Secretary and a Treasurer. There also may be such
other officers and assistant officers as, from time to time, may be elected or
appointed by the Board of Directors or by the Executive Committee.
ARTICLE X
OFFICERS - HOW CHOSEN
SECTION 1. At the first meeting after the annual meeting of
stockholders, the Directors shall elect annually from among their own number a
Chairman of the Board and a President. They shall also elect a Vice Chairman,
the several Vice Presidents, a Controller, a Secretary and a Treasurer, to hold
office for one year or until others are elected and qualify in their stead or
until their earlier resignation or removal.
SECTION 2. The Directors or the Executive Committee shall also elect or
appoint such other officers and assistant officers as from time to time they may
determine, and who shall hold office during the pleasure of the Board or of the
Executive Committee.
ARTICLE XI
CHAIRMAN OF THE BOARD
SECTION 1. The Chairman of the Board shall be the Chief Executive
Officer of the Company, and shall have general supervision and direction over
the business and policies of the Company, and over all the other officers of the
Company and shall see that their duties are properly performed. He or she shall
have all the powers conferred upon the President by these By-laws, except such
as by the laws of the State of Delaware can be exercised only by the President
or a Vice President.
SECTION 2. The Chairman of the Board shall be ex-officio a member of
all standing committees, shall have the general powers and duties of the
direction, supervision and
7
<PAGE> 9
management usually vested in the Chief Executive Officer of a corporation, and
shall preside at all meetings of the Board of Directors. He or she shall see
that all orders and resolutions of the Board of Directors and Executive
Committee are carried into effect.
SECTION 3. The Chairman of the Board shall submit reports of the
current operations of the Company to the Board of Directors and Executive
Committee at their regular meetings, and annual reports to the stockholders.
ARTICLE XII
VICE CHAIRMAN
SECTION 1. The Vice Chairman shall have general supervision and
direction over the business and policies of the Company, and over all the other
officers (other than the Chairman of the Board) of the Company and shall see
that their duties are properly performed. He or she shall have all the powers
conferred upon the President by these By-laws, except such as by the laws of the
State of Delaware can be exercised only by the President or a Vice President and
the powers conferred upon him or her from time to time by the Board of
Directors.
SECTION 2. The Vice Chairman shall preside at all meetings of the Board
of Directors in the absence of the Chairman of the Board, unless the Board of
Directors appoints another director or officer of the Company to so preside.
SECTION 3. The Vice Chairman shall be ex-officio a member of all
standing committees, and, in the absence of the Chairman of the Board, shall
have the general powers and duties of the Chairman of the Board and of the
supervision, direction and management usually vested in the office of a chief
executive officer of a corporation.
ARTICLE XIII
PRESIDENT
SECTION 1. The President shall be the Chief Operating Officer of the
Company, and, if the President shall not also be the Chairman of the Board,
shall be subordinate to the Chairman of the Board and the Vice Chairman, shall
have general supervision and direction over the business and policies of the
Company, and over all the other officers of the Company, and shall see that
their duties are properly performed.
SECTION 2. The President shall preside at all meetings of the Board of
Directors in the absence of the Chairman of the Board and the Vice Chairman,
unless the Board of Directors appoints another director or officer of the
Company to so preside.
8
<PAGE> 10
SECTION 3. The President shall be ex-officio a member of all standing
committees, and, in the absence of the Chairman of the Board and the Vice
Chairman, shall have the general powers and duties of the Chairman of the Board
and the Vice Chairman and of the supervision, direction and management usually
vested in the office of a president or chief executive officer of a corporation.
ARTICLE XIV
VICE PRESIDENTS
SECTION 1. Each Vice President shall have such powers and perform such
duties as may be assigned to him or her by the Board of Directors or Executive
Committee, or, subject to Section 2 of Article XVIII, by the Chairman of the
Board, or the President. The Board of Directors may add to the title of any Vice
President such distinguishing designation as may be deemed desirable, which
designation may reflect seniority, duties, or responsibilities of such Vice
President. In the absence of the President, any Vice President designated by the
Chairman of the Board may perform the duties and exercise the powers of the
President.
ARTICLE XV
CONTROLLER
SECTION 1. The Controller shall have charge of and supervise all
accounting matters, the preparation of all accounting reports and statistics of
the Company and its subsidiaries, and shall perform the duties usually incident
to the office of the Controller. He or she shall submit such reports and records
to the Board of Directors or the Executive Committee as may be requested by
them, or by the Chairman of the Board, by the Vice Chairman or by the President.
ARTICLE XVI
SECRETARY
SECTION 1. The Secretary shall attend all sessions of the Board of
Directors and of the Executive Committee, and act as clerk thereof and record
all votes and the minutes of all proceedings in a book to be kept for that
purpose, and shall perform like duties for the Standing Committees when
required.
9
<PAGE> 11
SECTION 2. The Secretary shall see that proper notice is given of all
meetings of the stockholders of the Company, of the Board of Directors and of
the Executive Committee. In his absence, or in case of his failure or inability
to act, an Assistant Secretary or a secretary pro-tempore shall perform his
duties and such other duties as may be prescribed by the Board of Directors.
SECTION 3. The Secretary shall keep account of certificates of stock or
other receipts and securities representing an interest in or to the capital of
the Company, transferred and registered in such form and manner and under such
regulations as the Board of Directors may prescribe.
SECTION 4. The Secretary shall keep in safe custody the contracts,
books and such corporate records as are not otherwise provided for, and the seal
of the Company. He or she shall affix the seal to any instrument requiring the
same and the seal, when so affixed, shall be attested by the signature of the
Secretary, an Assistant Secretary, Treasurer or an Assistant Treasurer.
ARTICLE XVII
TREASURER
SECTION 1. The Treasurer shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Company and shall deposit
all money in the name of, for the account of or to the credit of the Company in
such depositories as may be designated by the Board of Directors or by the
Executive Committee, and shall keep all securities and other valuable effects in
a safe place designated by the Board of Directors or the Executive Committee.
SECTION 2. The Treasurer shall perform such other duties as the Board
of Directors or the Executive Committee may from time to time prescribe or
require.
ARTICLE XVIII
DUTIES OF OFFICERS
SECTION 1. In addition to the duties specifically enumerated in these
By-laws, all officers and assistant officers of the Company shall perform such
other duties as may be assigned to them from time to time by the Board of
Directors, the Executive Committee, or by their superior officers.
10
<PAGE> 12
SECTION 2. The Board of Directors or Executive Committee may change the
powers or duties of any officer or assistant officer, or delegate the same to
any other officer, assistant officer or person.
SECTION 3. Every officer and assistant officer of the Company shall
from time to time report to the Board of Directors, the Executive Committee or
to his superior officers all matters within his knowledge which the interests of
the Company may require to be brought to their notice.
ARTICLE XIX
CERTIFICATES OF STOCK, SECURITIES, NOTES, RECORD DATE, ETC.
SECTION 1. Certificates of stock, or other receipts and securities
representing an interest in or to the capital of the Company, shall bear the
signature of the Chairman of the Board, the Vice Chairman, the President or any
Vice President and bear the countersignature of the Secretary or any Assistant
Secretary or the Treasurer or any Assistant Treasurer.
SECTION 2. Nothing in this Article XIX shall be construed to limit the
right of the Company, by resolution of its Board of Directors or Executive
Committee, to authorize, under such conditions as such Board or Committee may
determine, the facsimile signature by any properly authorized officer of any
instrument or document that said Board of Directors or Executive Committee may
determine.
SECTION 3. In case any officer, transfer agent or registrar who shall
have signed or whose facsimile signature shall have been used on any
certificates of stock, notes or securities shall cease to be such officer,
transfer agent or registrar of this Company, whether because of death,
resignation or otherwise, before the same shall have been issued by this
Company, such certificates of stock, notes and securities may nevertheless be
adopted by this Company and be issued and delivered as though the person or
persons who signed the same or whose facsimile signature or signatures shall
have been used thereon had not ceased to be such officer, transfer agent or
registrar of this Company, and such adoption of said certificates of stock,
notes and securities shall be evidenced by a resolution of the Board of
Directors or Executive Committee to that effect.
SECTION 4. All transfers of the stock of the Company shall be made upon
the books of the Company by the owners of the shares in person or by their legal
representatives.
SECTION 5. Certificates of stock shall be surrendered and canceled at
the time of transfer.
11
<PAGE> 13
SECTION 6. The Company shall be entitled to treat the holder of record
of any share or shares of stock as the holder in fact thereof, and accordingly
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.
SECTION 7. In the case of a loss or the destruction of a certificate of
stock, another may be issued in its place upon satisfactory proof of such loss
or destruction and the giving of a bond of indemnity, unless waived, approved by
the Board of Directors or by the Executive Committee.
SECTION 8. In order that the Company may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution of allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less then ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE XX
CHECKS, LOANS, COMMERCIAL PAPER, CONTRACTS, ETC.
SECTION 1. Any two of the following officers who are authorized by the
Board of Directors or Executive Committee, to wit, the Chairman of the Board,
the Vice Chairman, the President, the Vice Presidents, the Secretary or the
Treasurer, not being the same person, or any of them together with an Assistant
Vice President, an Assistant Secretary or an Assistant Treasurer, shall have the
authority to sign and execute on behalf of the Company as maker, drawer,
acceptor, guarantor, endorser, assignor or otherwise, all notes, collateral
trust notes, debentures, drafts, bills of exchange, acceptances, securities and
commercial paper of all kinds.
SECTION 2. The Chairman of the Board, the Vice Chairman, the President,
any Vice President, the Secretary, the Treasurer or any other person, when such
officer or other person is authorized by the Board of Directors or Executive
Committee, shall have authority, on behalf of and for the account of the
Company, (a) to borrow money against duly executed obligations of the Company;
(b) to sell, discount or otherwise dispose of notes, collateral trust notes,
debentures, drafts, bills of exchange, acceptances, securities, obligations of
the Company and commercial paper of all kinds; (c) to sign orders for the
transfer of money to affiliated or subsidiary companies; and (d) to execute
contracts.
12
<PAGE> 14
SECTION 3. The Board of Directors or the Executive Committee may either
in the absence of any of said officers or persons, or for any other reason,
appoint some other officer or some other person to exercise the powers and
discharge the duties of such officer or person under this Article, and the
officer or person so appointed shall have all the power and authority hereby
conferred upon the officer for whom he or she may be appointed so to act.
SECTION 4. Commercial paper, in the form of short term promissory
notes, of the Company issued by arrangement with a bank duly authorized by the
Board of Directors or Executive Committee of this Company shall be issued under
the manual signature of one of the officers of the Company and manually
co-signed on behalf of the Company by an employee of the bank approved by the
Company; provided however, that the Board of Directors or Executive Committee
may, by resolution, provide, with such protective measures as they may
prescribe, that, in lieu of the manual signature of an officer of this Company
on any such commercial paper of the company issued by an authorized bank as
aforesaid, the facsimile signature of an officer of this Company may be used
thereon, and said facsimile signature, when placed thereon, shall have the same
effect as though said commercial paper had been manually signed by an officer of
this Company.
ARTICLE XXI
FISCAL YEAR
SECTION 1. The fiscal year of the Company shall begin the first day of
January and terminate on the thirty-first day of December in each year.
ARTICLE XXII
NOTICE
SECTION 2. Whenever under the provisions of the laws of the State of
Delaware or these By-laws notice is required to be given to any Director, member
of the Executive Committee, officer or stockholder, it shall not be construed to
mean personal notice, but such notice may be given by wire or in writing by
depositing the same in the post office or letter box in a post paid, sealed
wrapper, addressed to such Director, member of the Executive Committee, officer
or stockholder at his or her address as the same appears in the books of the
Company; and the time when the same shall be mailed shall be deemed to be the
time of the giving of such notice.
13
<PAGE> 15
ARTICLE XXIII
WAIVER OF NOTICE
SECTION 1. Any stockholder, Director or member of the Executive
Committee may waive in writing any notice required to be given under these
By-laws.
ARTICLE XXIV
AMENDMENT OF BY-LAWS
SECTION 1. Except as otherwise provided in the Certificate of
Incorporation of the Company, the Board of Directors, at any meeting, may alter
or amend these By-laws, and any alteration or amendments so made may be repealed
by the Board of Directors or by the stockholders at any meeting duly called.
14
<PAGE> 1
Exhibit 11.01
Travelers Property Casualty Corp. and Subsidiaries
Computation of Earnings Per Share
(In millions, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Earnings:
Income applicable to common stock $ 273 $ 98
=========== ===========
Average shares:
Common 399.3 294.5
=========== ===========
Earnings Per Share:
Net income $ 0.68 $ 0.33
=========== ===========
</TABLE>
Earnings per common share is computed after recognition of preferred stock
dividend requirements and is based on the weighted average number of common
shares and common share equivalents outstanding during the period. For purposes
of the computation of earnings per share, the weighted average number of common
shares and common share equivalents was computed by treating the common stock
issued within a one-year period prior to the initial filing of the registration
statement relating to the initial public offering (IPO) as outstanding for all
reported periods. This amount was then reduced by the dilutive effect of such
issuances of stock prior to the IPO determined by using the actual proceeds and
the number of shares that could have been repurchased using the IPO price as the
repurchase price for all periods presented. Fully diluted earnings per common
share assuming the dilutive effect of common stock equivalents has not been
presented because the effects are not significant.
<PAGE> 1
Exhibit 12.01
Travelers Property Casualty Corp. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(In millions of dollars, except for ratio)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------
1997 1996
---- ----
<S> <C> <C>
Income before income taxes $390 $125
Interest 40 --
Portion of rentals deemed to be interest 9 9
---- ----
Earnings available for fixed charges $439 $134
==== ====
Fixed charges:
Interest $ 40 $ --
Portion of rentals deemed to be interest 9 9
---- ----
Total fixed charges $ 49 $ 9
==== ====
Ratio of earnings to fixed charges 8.96x 14.89x
===== ======
</TABLE>
The ratio of earnings to fixed charges is computed by dividing income before
income taxes and fixed charges by the fixed charges. For purposes of these
ratios, fixed charges consist of interest expense and that portion of rentals
deemed representative of the appropriate interest factor.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1997 FINANCIAL STATEMENTS OF TRAVELERS PROPERTY CASUALTY CORP. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001010551
<NAME> TRAVELERS PROPERTY CASUALTY CORP.
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 24,065
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 938
<MORTGAGE> 935
<REAL-ESTATE> 215
<TOTAL-INVEST> 29,439
<CASH> 106
<RECOVER-REINSURE> 9,798
<DEFERRED-ACQUISITION> 464
<TOTAL-ASSETS> 50,556
<POLICY-LOSSES> 31,287
<UNEARNED-PREMIUMS> 3,803
<POLICY-OTHER> 1,880
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 1,249
900
0
<COMMON> 4
<OTHER-SE> 6,343
<TOTAL-LIABILITY-AND-EQUITY> 50,556
1,800
<INVESTMENT-INCOME> 500
<INVESTMENT-GAINS> 8
<OTHER-INCOME> 26
<BENEFITS> 1,373
<UNDERWRITING-AMORTIZATION> 283
<UNDERWRITING-OTHER> 345
<INCOME-PRETAX> 390
<INCOME-TAX> 117
<INCOME-CONTINUING> 273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 273
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
<PAGE> 1
Exhibit 99.01
Company's Prospectus
April 22, 1996
Pages 90 and 91
A number of cases have been filed against several insurance companies and
industry organizations relating to service fee charges and premium calculations
on certain workers' compensation insurance. Certain subsidiaries of the Company
are defendants in South Carolina ex rel. Medlock v. National Council on
Compensation Insurance ("NCCI"), an action filed by the Attorney General of
South Carolina in August 1994 in the Court of Common Pleas, County of
Greenville, South Carolina; Four Way Plant Farm v. NCCI, a purported class
action filed in September 1994 in the Circuit Court for Bullock County, Alabama;
and NC Steel, Inc. v. NCCI, a purported class action filed in November 1993 in
the Superior Court Division of the General Court of Justice, Wake County, North
Carolina. In these cases, the plaintiffs generally allege that the
administration of each state's workers' compensation assigned risk pool
conspired with servicing carriers for the pool to collect excessive fees in
violation of state antitrust and/or unfair trade practice laws. The plaintiffs
seek unspecified compensatory, treble and/or punitive damages and injunctive
relief. The Company believes it has meritorious defenses and intends to contest
the allegations. In NC Steel, Inc. v. NCCI, the defendants' motion to dismiss
was granted in February 1995, and the plaintiffs have appealed to the North
Carolina Court of Appeals. In April 1994, certain subsidiaries of [the Company]
were named as additional defendants in a purported class action pending in the
116th District of Dallas County, Texas, entitled Weatherford Roofing Company v.
Employers National Insurance Company. The plaintiffs in this case allege that
the workers' compensation carriers in Texas have conspired to collect excessive
or improper premiums in violation of state insurance laws, antitrust laws and/or
state unfair trade practices laws. The plaintiffs seek compensatory, treble
and/or punitive damages as well as declaratory and injunctive relief. In a
statutory demand letter, plaintiffs' counsel allege classwide compensatory
damages, including interest through October 1994, of approximately $572 million.
Since that time, court-approved settlements with certain other insurers have
been based on single damage, or alleged overcharge, calculations which, if
applied to Company-issued policies of class members, would yield single damages
of $50 million or less. The Company believes it has meritorious defenses and
intends to contest the allegations unless an attractive settlement opportunity
arises.
<PAGE> 2
Company's Form 10-Q
June 30, 1996
Page 24
For information concerning actions filed against several insurance companies and
industry organizations relating to service fee charges and premium calculations
on certain workers' compensation insurance, see the description that appears in
the paragraph beginning on page 90 and continuing on page 91 of the Company's
Prospectus dated April 22, 1996, which description is incorporated by reference
herein. A copy of the pertinent paragraph of such filing is included as an
exhibit to this Form 10-Q. Two of such actions, Four Way Plant Farm v. NCCI and
Weatherford Roofing Company v. Employees National Insurance Company, have been
settled, subject to approval of the court. In another such action, NC Steel,
Inc. v. NCCI, the North Carolina Court of Appeals affirmed the trial court's
dismissal in part, reversed in part and remanded for further proceedings.
<PAGE> 3
Company's Form 10-Q
September 30, 1996
Page 25
ITEM 1. LEGAL PROCEEDINGS.
For information concerning actions filed against several insurance
companies and industry organizations relating to service fee charges and
premium calculations on certain workers' compensation insurance, see the
descriptions that appear in the paragraph that begins on page 90 and ends on
page 91 of the Company's Prospectus dated April 22, 1996, and in the first
paragraph on page 24 of the Company's Quarterly Report om Form 10-Q for the
quarter ended June 30, 1996, which descriptions are incorporated by reference
herein. A copy of the pertinent paragraphs of such filings is included as an
exhibit to this Form 10-Q. In October 1996, certain subsidiaries of the Company
were named as defendants in a purported class action filed in the District
Court of Wyandotte County, Kansas, Civil Court Department under the name
Amundoson & Associates Art Studio Ltd. v. NCCI, et al. The plaintiffs make
allegations and seek damages that are similar to those in the cases
referred to above.
For information concerning actions filed against several insurance
companies and industry organizations relating to service fee charges and premium
calculations on certain workers' compensation insurance, see the descriptions
that appear in the paragraph that begins on page 90 and ends on page 91 of the
Company's Prospectus dated April 22, 1996, the first paragraph on page 24 of the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and
the first paragraph on page 25 of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996, which descriptions are incorporated by
reference herein. A copy of the pertinent paragraphs of such filings is included
as an exhibit to this Form 10-K. In NC Steel, Inc. v. NCCI, plaintiffs and
defendants have appealed to the North Carolina State Supreme Court. In November
1996, Amundson & Associates Art Studio v. NCCI, et al. was removed to the U.S.
District Court for the District of Kansas. In December 1996, a purported class
action entitled Forman, Inc. v. NCCI, et al. was filed in Chancery Court, Marion
County, Tennessee, with allegations similar to those in NC Steel and seeking
unspecified monetary damages. In January 1997, two additional purported class
actions, each entitled El Chico Restaurants, Inc. v. The Aetna Casualty and
Surety Company, et al., were filed in Chancery Court, Davidson County,
Tennessee, and Superior Court, Richmond County, Georgia, respectively, with
allegations similar to those in Weatherford Roofing Company v. Employers
National Insurance Company, which was settled in mid-1996. Plaintiffs seek
unspecified monetary damages. In February 1997, one action was removed to the
U.S. District Court for the Middle District of Tennessee and the other action
was removed to the U.S. District Court for the Southern District of Georgia.
Also in January 1997, a purported class of Texas workers' compensation insureds
filed a petition to intervene in a lawsuit pending since 1995 in District Court,
Travis County, Texas, entitled Travelers Indemnity Company of Connecticut v.
Texas Workers Compensation Insurance Facility. The pending lawsuit arose out of
a fee dispute between certain subsidiaries of the Company and the administration
of the Texas assigned risk pool. The proposed class challenges both the fees
paid to servicing carriers for the pool from 1991 to 1993 and certain premium
calculations on certain workers' compensation policies from 1991 forward. The
Company believes it has meritorious defenses to these actions and intends to
contest the allegations.
<PAGE> 1
Exhibit 99.02
Company's Prospectus
April 22, 1996
Page 91
On April 2, 1996, individual and institutional plaintiffs, on their own behalf
and also purporting to represent a putative class of similarly situated persons
who may lose their employment as a result of the Acquisition, filed an appeal
captioned Capital Region Conference of Churches, et al. vs. State of
Connecticut Department of Insurance, et al., (Judicial District of
Hartford/New Britain at Hartford, Superior Court of the State of Connecticut)
(the "appeal"), from the Memorandum of Decision issued by the Deputy
Commissioner of the State of Connecticut Department of Insurance approving the
Acquisition. The Appeal alleges procedural defects in the approval process.
However, the Appeal does not seek a specific remedy. TIGI believes the Appeal
is without merit and plans vigorously to oppose it. On April 9, 1996, TIGI,
Aetna Casualty and Standard Fire moved for dismissal of the Appeal.
For information concerning the appeal of a Memorandum of Decision
issued by the Connecticut Department of Insurance approving the acquisition by
the Company of Aetna P&C, see the description that appears in the second full
paragraph on page 91 of the Company's Prospectus dated April 22, 1996, which
description is incorporated by reference herein. A copy of the pertinent
paragraph of such filing is included as an exhibit to this Form 10-K. In October
1996, the court dismissed the appeal. Plaintiffs have appealed the dismissal.
