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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JULY 15, 1997
TRAVELERS PROPERTY CASUALTY CORP.
(Exact name of registrant as specified in its charter)
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<CAPTION>
DELAWARE 1-14328 06-1445591
<S> <C> <C>
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
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ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 277-0111
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TRAVELERS PROPERTY CASUALTY CORP.
CURRENT REPORT ON FORM 8-K
ITEM 5. OTHER EVENTS
Travelers Property Casualty Corp. (the Company) reported operating
earnings of $280.4 million, or $0.70 per share, for the quarter ended June 30,
1997, up 32% from $213.0 million, or $0.56 per share in 1996. Net income was
$276.0 million, or $0.69 per share in 1997, compared with a loss of $216.2
million, or $0.59 per share in 1996. Net income/loss includes $4.4 million and
$38.2 million in realized investment losses for the 1997 and 1996 quarters,
respectively, and $391.0 million of net charges related to the acquisition and
integration of the Aetna property casualty businesses in the second quarter of
1996. Per share results are based on 398.5 million and 374.2 million average
shares outstanding during the 1997 and 1996 quarters, respectively.
Net written premiums for the quarter were $1.886 billion compared to
$1.776 billion for the corresponding 1996 period, excluding an adjustment
associated with a reinsurance transaction. The statutory combined ratio for the
quarter was 103.0%, an improvement from 107.2% in the 1996 quarter excluding
charges associated with the acquisition and integration of the Aetna property
casualty businesses.
Combined net written premiums for the six-month period were $3.999
billion in 1997 compared to $3.657 billion in 1996.
As of June 20, 1997, the Company agreed to repurchase, in the
aggregate, 6,600,102 shares of Class A Common Stock held by Aetna Services,
Inc., J.P. Morgan Capital Corporation, Fund American Enterprise Holdings, Inc.
and The Trident Partnership, L.P. (collectively, the "Private Investors") for a
total purchase price of approximately $240.8 million, representing a discount to
the then current market price. The repurchases, which closed on July 1, 1997,
represent 20% of the holdings of each of the Private Investors. As part of the
repurchase agreement, each of the Private Investors agreed to extend its
contractual sale restrictions on 50% of the remaining shares held by the Private
Investors for an additional period of approximately six months, to March 15,
1998. Following these transactions, Travelers Group Inc.'s beneficial ownership
of the Company increased to approximately 83.4%.
Note: Financial results for the first six months of 1996 do not include the
former Aetna property and casualty businesses for the first quarter of 1996,
since these businesses were acquired by the Company on April 2, 1996. Certain
combined production statistics have been included for the first six months of
1996 for comparative purposes only.
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COMMERCIAL LINES:
QUARTER -- OPERATING EARNINGS ROSE 17% TO $209.3 MILLION FROM $178.3
MILLION
SIX MONTHS -- OPERATING EARNINGS OF $402.8 MILLION, UP 70% FROM
$237.3 MILLION
In Commercial Lines, production was up compared with last year's second
quarter although the Company continued its disciplined underwriting in a highly
competitive marketplace. Production levels and customer retention remained
strong for all major businesses.
Operating earnings reached $209.3 million compared to $178.3 million in
the 1996 quarter. The operating results in this segment reflect strong net
investment income and continued expense savings. Catastrophe losses were
insignificant in both quarters.
The statutory combined ratio for the quarter was 109.7% compared to
111.5% in the 1996 quarter, excluding net charges related to the acquisition and
integration of the Aetna property casualty businesses. Total net written
premiums for the quarter were $1.141 billion compared to $1.100 billion in the
second quarter of 1996, excluding an adjustment associated with a reinsurance
transaction.
Combined net written premiums were $2.479 billion for the six months
ended June 30, 1997, compared to $2.324 billion in the 1996 period. This
increase was primarily attributable to a change to conform the Aetna method with
the Travelers method of recording net written premiums.
PERSONAL LINES:
QUARTER -- OPERATING EARNINGS GREW 57% TO $101.3 MILLION, UP FROM $64.7
MILLION
SIX MONTHS -- OPERATING EARNINGS REACHED $208.8 MILLION, UP 139% FROM
$87.4 MILLION
Personal Lines second quarter performance was strong as operating
income increased 57% over last year, benefiting from a low level of catastrophe
losses during the quarter, lower expenses and continued favorable prior year
reserve development in the automobile line. Catastrophe losses for the quarter
were $4.5 million after taxes and reinsurance, compared with $14.0 million a
year ago.
Production increased compared to second quarter 1996 and first quarter
1997 (excluding a change in reinsurance arrangements in January 1997), and good
retention experience continued in our target markets.
The statutory combined ratio for the quarter was 92.8% compared to
100.1% in the 1996 quarter. Total net written premiums were $744.9 million for
the quarter compared to $675.8 million in 1996. Combined net written premiums
were $1.520 billion for the six months ended June 30, 1997, compared to $1.333
billion in the 1996 period.
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CORPORATE AND OTHER: OPERATING EXPENSE OF $30.2 MILLION FOR THE QUARTER
COMPARED TO $30.0 MILLION IN THE 1996 QUARTER
The primary component of Corporate and Other operating expense for the
quarter was interest expense of $26.0 million reflecting financing costs
associated with the Aetna property casualty acquisition.
The Company is a leading provider of a broad range of insurance
products and services for commercial markets, including workers' compensation,
property, liability, specialty and fidelity and surety bonds. The Company is
also a leading provider of homeowners and auto insurance for consumers. The
Company is a member of Travelers Group Inc., a diversified financial services
company.
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SUMMARY OF EARNINGS Travelers Property Casualty Corp.
(in millions, except per share data)
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AS OF, AND FOR AS OF, AND FOR
THE QUARTER THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenues $2,430.9 $2,202.2 $4,862.2 $3,354.1
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Operating income $ 280.4 $ 213.0 $ 548.3 $ 293.8
Net charges related to the acquisition and integration of Aetna P&C - (391.0) - (391.0)
Realized investment gains (losses) (4.4) (38.2) 0.8 (21.0)
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Net income (loss) 276.0 (216.2) 549.1 (118.2)
Preferred dividends - 3.5 - 3.5
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Net income (loss) applicable to common stock $ 276.0 $ (219.7) $ 549.1 $ (121.7)
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EARNINGS PER SHARE:
Operating income $ 0.70 $ 0.56 $ 1.37 $ 0.87
Net charges related to the acquisition and integration of Aetna P&C - (1.05) - (1.17)
Realized investment gains (losses) (0.01) (0.10) 0.01 (0.06)
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Net income (loss) $ 0.69 $ (0.59) $ 1.38 $ (0.36)
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Dividends declared $ 30.0 $ - $ 60.0 $ -
Weighted average number of common shares outstanding and
common stock equivalents 398.5 374.2 399.0 334.3
Common shares outstanding at period end 393.1 400.0 393.1 400.0
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OPERATING INCOME (LOSS)
Commercial Lines $ 209.3 $ 178.3 $ 402.8 $ 237.3
Personal Lines 101.3 64.7 208.8 87.4
Corporate and Other (30.2) (30.0) (63.3) (30.9)
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$ 280.4 $ 213.0 $ 548.3 $ 293.8
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REVENUES
Commercial Lines $1,612.3 $1,445.3 $3,236.4 $2,219.9
Personal Lines 814.9 749.7 1,619.9 1,122.3
Corporate and Other 3.7 7.2 5.9 11.9
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$2,430.9 $2,202.2 $4,862.2 $3,354.1
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REVENUES EXCLUDING REALIZED INVESTMENT GAINS (LOSSES)
Commercial Lines $1,612.4 $1,494.8 $3,224.7 $2,243.4
Personal Lines 821.6 758.4 1,630.3 1,130.8
Corporate and Other 3.7 7.6 5.9 12.3
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$2,437.7 $2,260.8 $4,860.9 $3,386.5
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</TABLE>
Note: Financial data for Travelers Casualty and Surety Company, formerly The
Aetna Casualty and Surety Company, and The Standard Fire Insurance
Company (Aetna P&C) is included from the date of acquisition (April 2,
1996).
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AFTER-TAX INCOME BY SOURCE TRAVELERS PROPERTY CASUALTY CORP.
(IN MILLIONS)
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FOR THE QUARTER FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
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Property Casualty Operations:
Underwriting:
Commercial Lines $ (90.8) $ (476.5) $(192.4) $(535.8)
Personal Lines 30.8 (14.5) 70.4 (24.8)
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Total GAAP underwriting loss (60.0) (491.0) (122.0) (560.6)
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Other income 17.1 15.0 33.1 21.2
Net investment income 353.5 328.0 700.5 473.1
Effective tax rate on net investment income 30.0% 30.4% 30.3% 29.0%
Net charges related to the acquisition and
integration of Aetna P&C - 391.0 - 391.0
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Operating income from Property Casualty
Operations 310.6 243.0 611.6 324.7
Operating loss from Corporate and Other (30.2) (30.0) (63.3) (30.9)
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Total operating income 280.4 213.0 548.3 293.8
Net charges related to the acquisition and
integration of Aetna P&C - (391.0) - (391.0)
Realized investment gains (losses) (4.4) (38.2) 0.8 (21.0)
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Net income (loss) 276.0 (216.2) 549.1 (118.2)
Preferred dividends - 3.5 - 3.5
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Net income (loss) applicable to common stock $276.0 $(219.7) $549.1 $(121.7)
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NOTE: Financial data for Travelers Casualty and Surety Company, formerly The Aetna Casualty and Surety Company, and The Standard
Fire Insurance Company (Aetna P&C) is included from the date of acquisition (April 2, 1996).
Certain reclassifications have been made to prior year financial information to conform to the current year's presentation.
6
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CONSOLIDATED STATEMENT OF OPERATIONS TRAVELERS PROPERTY CASUALTY CORP.
(IN MILLIONS)
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FOR THE QUARTER FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
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Revenues:
Premiums $ 1,811.8 $ 1,666.6 $ 3,611.7 $ 2,492.8
Net investment income 506.4 471.8 1,006.6 667.5
Fee income 91.4 100.6 188.4 193.7
Realized investment gains (losses) (6.8) (58.6) 1.3 (32.4)
Other revenues 28.1 21.8 54.2 32.5
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Total revenues 2,430.9 2,202.2 4,862.2 3,354.1
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Claims and expenses:
Claims and claim adjustment expenses* 1,375.1 1,806.9 2,748.2 2,537.2
Amortization of deferred acquisition costs 279.2 246.9 562.3 370.0
Interest expense 40.0 38.0 79.9 38.0
General and administrative expenses 344.0 470.9 689.1 644.7
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Total expenses 2,038.3 2,562.7 4,079.5 3,589.9
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Net income (loss) before federal income taxes 392.6 (360.5) 782.7 (235.8)
Federal income taxes (benefit) 116.6 (144.3) 233.6 (117.6)
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Net income (loss) $ 276.0 $ (216.2) $ 549.1 $ (118.2)
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Operating income $ 280.4 $ 213.0 $ 548.3 $ 293.8
*Includes pre-tax:
Catastrophe losses(1) $ 7.3 $ 22.2 $ 14.8 $ 59.1
Asbestos and environmental losses $ 29.0 $ 73.0 $ 59.0 $ 101.0
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(1) Net of reinsurance.
Note: Financial data for Travelers Casualty and Surety Company, formerly The
Aetna Casualty and Surety Company, and The Standard Fire Insurance Company
(Aetna P&C) is included from the date of acquisition (April 2, 1996).
Certain reclassifications have been made to prior year financial
information to conform to the current year's presentation.
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SELECTED STATISTICS TRAVELERS PROPERTY CASUALTY CORP.
PROPERTY CASUALTY OPERATIONS (1)
(IN MILLIONS)
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FOR THE QUARTER FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
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GAAP consolidated statement
of operations
Revenues:
Premiums $1,811.8 $1,660.1 $3,611.7 $2,482.8
Net investment income 505.3 471.2 1,005.0 666.3
Fee income 91.4 100.6 188.4 193.7
Realized investment gains
(losses) (6.8) (58.2) 1.3 (32.0)
Other revenues 25.5 21.3 49.9 31.4
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Total revenues 2,427.2 2,195.0 4,856.3 3,342.2
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Claims and expenses:
Claims and claim adjustment
expenses 1,365.5 1,794.4 2,731.5 2,521.1
Policyholder dividends 9.6 10.4 16.7 12.2
Amortization of deferred
acquisition costs 279.2 246.9 562.3 370.0
General and administrative
expenses 333.9 457.5 665.9 627.0
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Total expenses 1,988.2 2,509.2 3,976.4 3,530.3
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Net income (loss) before federal
income taxes 439.0 (314.2) 879.9 (188.1)
Federal income taxes (benefit) 132.8 (128.3) 267.5 (101.1)
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Net income (loss) from Property
Casualty Operations* $ 306.2 $ (185.9) $ 612.4 $ (87.0)
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*Includes investment results, net
of taxes:
Net investment income $ 353.5 $ 328.0 $ 700.5 $ 473.1
Realized investment gains
(losses) $ (4.4) $ (37.9) $ 0.8 $ (20.7)
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</TABLE>
(1) Excludes Corporate and Other.
Note: Financial data for Travelers Casualty and Surety Company, formerly The
Aetna Casualty and Surety Company, and The Standard Fire Insurance Company
(Aetna P&C) is included from the date of acquisition (April 2, 1996).
Certain reclassifications have been made to prior year financial
information to conform to the current year's presentation.
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TRAVELERS PROPERTY CASUALTY CORP.
COMBINED RATIOS (BEFORE POLICYHOLDER DIVIDENDS)
PROPERTY CASUALTY OPERATIONS
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FOR THE QUARTER FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
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GAAP COMBINED RATIO:(1)
Loss and loss adjustment expense ratio 72.5% 104.8% 72.8% 97.4%
Other underwriting expense ratio 30.4% 39.0% 28.6% 34.2%
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Combined ratio 102.9% 143.8% 101.4% 131.6%
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GAAP COMBINED RATIO, EXCLUDING NET CHARGES RELATED
TO THE ACQUISITION AND INTEGRATION OF AETNA P&C:(1)
Loss and loss adjustment expense ratio 72.5% 77.1% 72.8% 78.8%
Other underwriting expense ratio 30.4% 32.6% 28.6% 30.3%
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Combined ratio 102.9% 109.7% 101.4% 109.1%
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STATUTORY COMBINED RATIO:
Loss and loss adjustment expense ratio 72.7% 108.7% 73.2% 100.1%
Other underwriting expense ratio 30.3% 34.3% 29.1% 31.7%
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Combined ratio 103.0% 143.0% 102.3% 131.8%
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STATUTORY COMBINED RATIO, EXCLUDING NET CHARGES RELATED
TO THE ACQUISITION AND INTEGRATION OF AETNA P&C:
Loss and loss adjustment expense ratio 72.7% 76.5% 73.2% 78.6%
Other underwriting expense ratio 30.3% 30.7% 29.1% 29.4%
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Combined ratio 103.0% 107.2% 102.3% 108.0%
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</TABLE>
(1) Beginning in 1997, for purposes of computing GAAP combined ratios, fee
income is 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. Fee income
allocated as a reduction of losses and loss adjustment expenses and other
underwriting expenses in the GAAP combined ratios was $51.7 million and
$39.7 million in the 1997 second quarter, $103.2 million and $85.2 million
in the 1997 six months, $53.9 million and $46.7 million in the 1996 second
quarter, and $102.8 million and $90.9 million in the 1996 six months. The
1996 GAAP combined ratios have been restated to conform to the current
year's presentation.
Note: Financial data for Travelers Casualty and Surety Company, formerly The
Aetna Casualty and Surety Company, and The Standard Fire Insurance Company
(Aetna P&C) is included from the date of acquisition (April 2, 1996).
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SELECTED INVESTMENT PORTFOLIO DATA TRAVELERS PROPERTY CASUALTY CORP.
(AT CARRYING VALUE, IN MILLIONS)
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AS OF AS OF
JUNE 30, DECEMBER 31,
1997 1996
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Fixed maturities, available for sale at fair value:
Mortgage-backed securities - principally obligations of U.S. Government agencies $ 5,069.6 $ 4,527.2
U.S. Treasury securities and obligations of U.S. Government corporations and agencies 1,915.2 2,450.6
Corporates (including redeemable preferreds) 11,974.6 11,653.4
Obligations of states and political subdivisions 5,720.2 5,218.8
Debt securities issued by foreign governments 700.0 595.9
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Total fixed maturities 25,379.6 24,445.9
Equity securities, at fair value 982.7 778.6
Mortgage loans and real estate held for sale 1,064.9 1,162.3
Short-term and other 2,156.7 2,977.5
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Total invested assets $29,583.9 $29,364.3
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Unrealized gain on investment securities, net of tax, included in stockholders' equity $ 279.8 $ 284.5
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SIGNATURE
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 hereunto duly authorized.
Dated: July 17, 1997
Travelers Property Casualty Corp.
By: /s/ William P. Hannon
-----------------------------
William P. Hannon
Chief Financial Officer
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