<PAGE>
As filed with the Securities and Exchange Commission on October 24, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRAVELERS PROPERTY CASUALTY CORP.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 06-1445591
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
</TABLE>
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
(860) 277-0111
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant(1)s Principal Executive Offices)
------------------------------
JAMES M. MICHENER, ESQ.
TRAVELERS PROPERTY CASUALTY CORP.
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
(860) 277-0111
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
------------------------------
COPIES TO:
FREDERICK W. KANNER, ESQ.
DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than the securities offered only in connection with dividend or
interest reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED AMOUNT OF
TITLE OF SHARES TO BE AMOUNT TO BE MAXIMUM AGGREGATE MAXIMUM AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PRICE PER UNIT(2) OFFERING PRICE(1)(2) FEE
<S> <C> <C> <C> <C>
Class A Common Stock,
$.01 par value................... 14,200,207 $ 36.13 $ 513,053,479 $ 155,471
</TABLE>
(1) Includes 1,000,000 shares to cover over-allotments, if any, pursuant to an
over-allotment option granted to the Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and based on the average of the high and low prices
of the Class A Common Stock on October 23, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 24, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
P R O S P E C T U S
13,200,207 SHARES
[LOGO]
CLASS A COMMON STOCK
-----------
All the shares of Class A Common Stock, $.01 par value per share (the "Class
A Common Stock"), of Travelers Property Casualty Corp., a Delaware corporation
(the "Company"), being offered hereby are being sold by certain stockholders of
the Company. See "Selling Stockholders." The Company will not receive any
proceeds from the sale of the Class A Common Stock.
The Class A Common Stock is listed on the New York Stock Exchange, Inc. (the
"NYSE") under the symbol "TAP." On October 23, 1997, the last sale price of the
Class A Common Stock as reported on the NYSE was $36.50 per share. See "Price
Range of Common Stock and Dividends."
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
DISCOUNTS AND SELLING
PRICE TO PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) The Company has agreed to pay certain expenses in connection with the
offering estimated at $ .
(3) The Selling Stockholders (as defined herein) have granted to the
Underwriters a 30-day option to purchase up to an aggregate of 1,000,000
additional shares of Class A Common Stock on the same terms as set forth
above solely to cover over-allotments, if any. See "Underwriting." If
such option is exerised in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to Selling Stockholders will be
$ , $ and $ , respectively.
------------------
The Shares of Class A Common Stock are being offered by the Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Class A Common Stock offered hereby will be available for delivery on or
about , 1997, at the office of Smith Barney Inc., 333 West 34th Street,
New York, New York 10001.
--------------
JOINT LEAD MANAGERS AND JOINT BOOKRUNNERS
SMITH BARNEY INC. J.P. MORGAN & CO.
---------
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
, 1997
<PAGE>
FOR NORTH CAROLINA PURCHASERS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY OF
THIS PROSPECTUS.
--------------
The Company owns, directly or indirectly, all of the outstanding voting
securities of certain property and casualty insurance companies domiciled in the
States of California, Connecticut, Florida, Illinois, Indiana, Massachusetts,
Missouri, New Jersey and Texas. State insurance regulatory laws require prior
approval by state insurance departments of any acquisition of control of a
domestic insurance company or of any company which controls a domestic insurance
company. "Control" is generally presumed to exist through the ownership of 10%
or more of the voting securities of a domestic insurance company or of any
company which controls a domestic insurance company. Any purchaser of shares of
Class A Common Stock representing 10% or more of the voting power of the Company
will be presumed to have acquired control of the domestic insurance subsidiaries
unless the relevant Insurance Commissioner, following application by such
purchaser in each insurance subsidiary's state of domicile, determines
otherwise. Accordingly, any purchase of shares of Class A Common Stock that
would result in a purchaser owning 10% or more of the voting power of the
Company would require prior action by all or some of the Insurance Commissioners
of the above-referenced states and certain jurisdictions outside of the United
States.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE CLASS A
COMMON STOCK, INCLUDING OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING
SYNDICATE COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
THE COMPANY
The Company is the seventh largest property and casualty group and the
fourth largest publicly owned property and casualty group in the United States
based on 1996 net written premiums published by A.M. Best Company ("A.M. Best").
The Company provides a wide range of commercial and personal property and
casualty insurance products ("Commercial Lines" and "Personal Lines,"
respectively) and services to businesses, government units, associations and
individuals. The Company's strategic objectives are to be a consistently
profitable market leader and a low-cost provider of property and casualty
insurance in the United States through disciplined underwriting and expense
management. Commercial Lines, which accounted for 62.7% of net premiums written
in 1996, includes workers' compensation, general liability, commercial
multi-peril, commercial automobile, property (including fire and allied lines)
and several specialty lines. Personal Lines, which accounted for the remaining
37.3% of net premiums written in 1996, includes primarily personal automobile
and homeowners insurance sold to individuals. At June 30, 1997, the Company had
total assets and stockholders' equity of $49.9 billion and $6.7 billion,
respectively.
On April 2, 1996, the Company acquired all of the outstanding capital stock
of the property and casualty insurance subsidiaries of Aetna Services, Inc.
(formerly Aetna Life and Casualty Company) ("Aetna") for approximately $4.2
billion in cash (the "Acquisition"). At the time of the Acquisition, the Company
identified $300 million in projected annual pre-tax cost savings which it
targeted to be achieved by the end of 1997. During the second quarter of 1997,
the Company announced it had achieved its stated goal of $300 million in pre-tax
annualized expense savings. The Company will continue to concentrate on expense
savings as an important part of its operating strategy.
The Company believes it is well positioned in the property and casualty
insurance industry through its broadly recognized brand name and strong
financial position. As a result of its skilled management team, improved cost
structure and enhanced distribution and cross-selling capabilities, the Company
generated an annualized return on equity of over 16.0% for the six months ended
June 30, 1997.
The Company is the third largest writer of commercial lines insurance in the
United States based on 1996 net written premiums published by A.M. Best. The
Company's commercial lines strategy is to focus on its core product lines and
markets, with particular emphasis on industry and product specialization and
control of operating expenses to improve competitiveness and profitability.
Industry specialties include manufacturing, construction, transportation and
financial services, and product specialties include boiler and machinery
insurance, inland and ocean marine insurance and managed workers' compensation
insurance.
The Company is the second largest writer of personal lines insurance through
independent agents and the eighth largest writer of personal lines insurance
overall in the United States based on 1996 net written premiums published by
A.M. Best. The Company's personal lines strategy includes the growth in sales
through independent agents in target markets, control of operating expenses to
improve competitiveness and profitability, expansion of alternative marketing
channels to broaden the distribution of personal lines products, and management
of exposure to catastrophe losses. The Company has expended resources in both
its independent agency and other distribution channels for personal lines auto
and homeowners products. Over the last year, the Company has introduced new
incentive programs for its independent agents, invested in an agent direct mail
marketing program to support their businesses and continued to expand its
alternative distribution channels, which include affinity group sales, TRAVELERS
SECURE-Registered Trademark-brand products sold through the independent sales
force of Primerica Financial Services, a unit of Travelers Group Inc.
("Travelers Group"), and joint marketing arrangements with other insurers. The
Company's alternative distribution channels accounted for approximately 30% of
the new Personal Lines policies written in the nine month period ended September
30, 1997.
Travelers Group, through The Travelers Insurance Group Inc., its indirect
wholly owned subsidiary ("TIGI"), owns approximately 83.4% of the Company's
outstanding shares of Common Stock (as defined
3
<PAGE>
herein) and controls approximately 98.1% of the combined voting power of the
Common Stock. Travelers Group is a financial services holding company engaged,
through its subsidiaries, principally in four business segments: (i) Investment
Services; (ii) Consumer Finance Services; (iii) Property & Casualty Insurance
Services (through the Company); and (iv) Life Insurance Services. TIGI is not a
Selling Stockholder in the offering being made hereby.
The principal executive offices of the Company are located at One Tower
Square, Hartford, Connecticut 06183 and its telephone number is (860) 277-0111.
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS BEFORE
PURCHASING SHARES OF THE CLASS A COMMON STOCK OFFERED HEREBY.
IN THIS DOCUMENT (AND IN CERTAIN DOCUMENTS THAT ARE INCORPORATED BY
REFERENCE IN THIS PROSPECTUS), THE COMPANY HAS MADE FORWARD-LOOKING STATEMENTS
REGARDING EVENTS AND CIRCUMSTANCES THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES.
FORWARD-LOOKING STATEMENTS INCLUDE THE INFORMATION CONCERNING POSSIBLE OR
ASSUMED FUTURE RESULTS OF OPERATIONS OF THE COMPANY. ALSO, WORDS SUCH AS
"BELIEVES," "EXPECTS," "ANTICIPATES" OR SIMILAR EXPRESSIONS ARE FORWARD-LOOKING
STATEMENTS. PROSPECTIVE INVESTORS SHOULD NOTE THAT MANY FACTORS, SOME OF WHICH
ARE DISCUSSED IN THIS DOCUMENT AND IN THE DOCUMENTS WHICH ARE INCORPORATED
HEREIN BY REFERENCE, COULD AFFECT THE FUTURE FINANCIAL RESULTS OF THE COMPANY
AND COULD CAUSE THOSE RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN THIS
DOCUMENT. AMONG OTHERS, THESE FACTORS INCLUDE THE "RISK FACTORS" DESCRIBED
HEREIN.
FLUCTUATION AND UNCERTAINTY OF PROPERTY AND CASUALTY INSURANCE INDUSTRY RESULTS
The results of companies in the property and casualty insurance industry
historically have been subject to significant fluctuations and uncertainties.
The industry's profitability can be affected significantly by volatile and
unpredictable developments (including catastrophes); changes in reserves
resulting from general claims and legal environments as different types of
claims arise and judicial interpretations relating to the scope of insurers'
liability develop; fluctuations in interest rates and other changes in the
investment environment, which affect returns on invested capital; and
inflationary pressures that affect the size of losses. The demand for property
and casualty insurance can also vary significantly, generally rising as the
overall level of economic activity increases and falling as such activity
decreases. The property and casualty insurance industry historically has been
cyclical, and since the late 1980s premium rate competition has been a
significant cause of lower underwriting profitability. The Company's results of
operations may be adversely affected by these fluctuations.
CATASTROPHE LOSSES
Property and casualty insurers are subject to claims arising out of
catastrophes, which may have a significant effect on their results of operations
and financial condition. The Company has experienced, and can be expected in the
future to experience, catastrophe losses which may have a material adverse
effect on the Company's results of operations and financial condition.
Catastrophes can be caused by various events including hurricanes, windstorms,
earthquakes, hail, explosions, severe winter weather and fires, and the
incidence and severity of catastrophes are inherently unpredictable. The extent
of losses from a catastrophe is a function of both the total amount of insured
exposure in the area affected by the event and the severity of the event. Most
catastrophes are restricted to small geographic areas; however, hurricanes and
earthquakes may produce significant damage in large, heavily populated areas.
Although catastrophes can cause losses in a variety of the Company's property
and casualty lines, most of the Company's catastrophe-related claims in the past
have related to homeowners and commercial property coverages.
The Company generally seeks to reduce its exposure to catastrophe losses
through its selective underwriting practices and the purchase of catastrophe
reinsurance. There can be no assurance that the reinsurance purchased by the
Company will be adequate to protect the Company against material
4
<PAGE>
catastrophe losses or that such reinsurance will continue to be available to the
Company in the future at commercially reasonable rates. States have from time to
time passed legislation that has the effect of limiting the ability of insurers
to manage risk, such as legislation prohibiting an insurer from withdrawing from
catastrophe-prone areas. While the Company attempts to limit its exposure to
acceptable levels, subject to restrictions imposed by insurance regulatory
authorities, it is possible that a catastrophic event or multiple catastrophic
events could have a material adverse effect on the Company. The Company also
participates in the Florida Hurricane Catastrophe Fund ("FHCF"), which is a
state-mandated catastrophe reinsurance fund. See "--Reinsurance Considerations."
UNCERTAINTY REGARDING ADEQUACY OF PROPERTY AND CASUALTY LOSS RESERVES
The Company maintains property and casualty loss reserves to cover its
estimated ultimate liability for losses and loss adjustment expenses ("LAE")
with respect to reported and unreported claims incurred as of the end of each
accounting period. Reserves do not represent an exact calculation of liability,
but instead represent estimates, generally involving actuarial projections at a
given time, of what the Company expects the ultimate settlement and
administration of claims will cost based on its assessment of facts and
circumstances then known, estimates of future trends in claims severity,
frequency, judicial theories of liability and other factors. These variables are
affected by both internal and external events, such as changes in claims
handling procedures, economic inflation, judicial trends and legislative
changes. Many of these items are not directly quantifiable, particularly on a
prospective basis. Additionally, there may be significant reporting lags between
the occurrence of the insured event and the time it is actually reported to the
insurer. Reserve estimates are continually refined in a regular ongoing process
as experience develops and further claims are reported and settled. Adjustments
to reserves are reflected in the results of the periods in which such estimates
are changed. Because establishment of reserves is an inherently uncertain
process involving estimates of future losses, there can be no certainty that
currently established reserves will prove adequate in light of subsequent actual
experience.
The inherent uncertainties of estimating insurance reserves are generally
greater for casualty coverages (particularly reserves for asbestos losses), than
for property coverages, due primarily to the longer period of time that
typically elapses before a definitive determination of ultimate loss can be
made, changing theories of legal liability involving certain types of claims and
changing political climates.
UNCERTAINTY REGARDING ADEQUACY OF ENVIRONMENTAL AND ASBESTOS LOSS 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.
For environmental claims, the Company estimates its financial exposure and
establishes reserves based upon an analysis of its historical claim experience
and the facts of the individual underlying claims. The unique facts presented in
each claim are evaluated individually and collectively. Due consideration is
given to the many variables presented in each claim, as discussed above.
The following factors are evaluated in projecting the ultimate reserve for
asbestos-related claims: available insurance coverage; limits and deductibles;
an analysis of each policyholder's potential liability; jurisdictional
involvement; past and projected future claim activity; past settlement values of
similar claims; allocated claim adjustment expense; potential role of other
insurance, and applicable coverage defenses, if any. Once the gross ultimate
exposure for indemnity and allocated claim adjustment expense is determined for
a policyholder by policy year, a ceded projection is calculated based on any
applicable facultative and treaty reinsurance. In addition, a similar review is
conducted for asbestos property damage claims. However, due to the relatively
minor claim volume, these reserves have remained at a constant level.
5
<PAGE>
As a result of these processes and procedures, the reserves carried for
environmental and asbestos claims 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.
REINSURANCE CONSIDERATIONS
The Company uses reinsurance to help manage its exposure to property and
casualty risks. The availability and cost of reinsurance are subject to
prevailing market conditions, both in terms of price and available capacity,
which can affect the Company's business volume and profitability. Although the
reinsurer is liable to the Company to the extent of the reinsurance ceded, the
Company remains primarily liable as the direct insurer on all risks reinsured.
As a result, reinsurance ceded arrangements do not eliminate the Company's
obligation to pay all claims regardless of whether they have been ceded to
reinsurers. The Company is subject to credit risk with respect to its ability to
recover amounts due from reinsurers. The Company believes, based upon its review
of its reinsurers' financial statements and reputations in the reinsurance
marketplace, that the financial condition of its reinsurers is generally sound.
However, there can be no assurance that such reinsurers will remain sound until
they are called upon to pay amounts due, which may not occur for many years,
particularly in respect of environmental and asbestos claims, or that
reinsurance will be adequate to protect the Company against losses or that
reinsurance will continue to be available to the Company in the future at
commercially reasonable rates.
The Company also participates in FHCF, which is a state-mandated catastrophe
reinsurance fund. FHCF is primarily funded by premiums from the insurance
companies that write residential property business in Florida and, if
insufficient, by assessments on insurance companies that write other property
and casualty insurance in Florida, excluding workers' compensation. FHCF's
resources are limited to these contributions and to its borrowing capacity at
the time of a significant catastrophe. There can be no assurance that these
resources will be sufficient to meet the obligations of FHCF. The Company's
recovery of less than contracted amounts could have a material adverse effect on
the Company's results of operations in the event of a significant catastrophe in
Florida.
In 1996, Lloyd's of London ("Lloyd's"), one of the Company's largest
reinsurers, restructured its operations with respect to claims for years prior
to 1993. As of December 31, 1996, the Company had ceded insurance losses, loss
adjustment expenses and unearned premiums to Lloyd's of $488 million.
The outcome of the restructuring of Lloyd's 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 impact on collectibility could have a material adverse effect on the
Company's operating results in a future period. However, the Company believes
that it is not likely that the outcome of these matters could have a material
adverse effect on the Company's financial condition or liquidity.
HOLDING COMPANY STRUCTURE; DIVIDEND RESTRICTIONS
The Company is a holding company and has no direct operations. The Company's
principal asset is the capital stock of its insurance subsidiaries. The Company
relies primarily on dividends from its subsidiaries to meet its obligations for
payment of interest and principal on outstanding debt obligations,
6
<PAGE>
dividends to stockholders and corporate expenses. The ability of the insurance
subsidiaries to pay dividends to the Company in the future will depend on their
statutory surplus, on earnings and on regulatory restrictions. The Company's
principal insurance subsidiaries are domiciled in the State of Connecticut.
Connecticut law governing the payment of dividends by domestic insurance
companies provides that an insurer domiciled in Connecticut must obtain the
prior approval of the Connecticut Insurance Department for the declaration or
payment of any dividend that together with other distributions made within the
preceding twelve months exceeds the greater of (i) 10% of the insurer's surplus
or (ii) the insurer's net income for the twelve-month period ending the
preceding December 31st, in each case determined in accordance with statutory
accounting practices. Such declaration or payment is further limited by adjusted
unassigned funds (surplus), as determined in accordance with statutory
accounting practices. The insurance holding company laws of other states in
which the Company's subsidiaries are domiciled generally contain similar
(although in certain instances somewhat more restrictive) limitations on the
payment of dividends. Dividend payments to the Company from its insurance
subsidiaries are limited to $647 million in 1997 without prior approval of the
Connecticut Insurance Department. The inability of a significant subsidiary to
pay dividends to the Company in an amount sufficient to meet debt service
obligations would have a material adverse effect on the Company. The ability of
the Company to pay dividends on the Common Stock is also subject to restrictions
contained in the Company's revolving credit facility and, subject to minimum
ownership requirements, to the prior approval of Travelers Group. See "--Control
By and Relationship with Travelers Group; Conflicts of Interest."
CONTROL BY AND RELATIONSHIP WITH TRAVELERS GROUP; CONFLICTS OF INTEREST
The Company's voting stock has been divided into two classes with different
voting rights that enable TIGI (the holder of all of the outstanding Class B
Common Stock, $.01 par value per share (the "Class B Common Stock")) to control
the Company. On all matters submitted to a vote of stockholders, holders of
Class A Common Stock are entitled to one vote per share and holders of Class B
Common Stock are entitled to ten votes per share. Both classes vote together as
a single class on all matters, subject to certain exceptions described under
"Description of Capital Stock." Upon any transfer of shares of Class B Common
Stock to a person other than Travelers Group or its subsidiaries (other than the
Company or its subsidiaries), such shares will automatically convert into shares
of Class A Common Stock, except if shares of Class B Common Stock representing
more than a 50% economic interest in the Company are so transferred and except
in certain other limited circumstances. See "Description of Capital Stock." The
Class A Common Stock and the Class B Common Stock are collectively referred to
herein as the "Common Stock."
For so long as Travelers Group and its subsidiaries (excluding the Company
and its subsidiaries) continue beneficially to own shares of Common Stock
representing more than 50% of the combined voting power of the Common Stock,
Travelers Group, through TIGI, will control the Company and will be able to
elect all of the Company's directors and to determine the outcome of corporate
actions requiring stockholder approval, including, among other things, approving
or preventing a change of control of the Company, a business combination
involving the Company, the incurrence of certain indebtedness, the issuance of
additional Common Stock or other equity securities, subject to certain limited
exceptions, and the payment of dividends with respect to the Common Stock,
except as otherwise described herein. Pursuant to an Intercompany Agreement
between the Company and Travelers Group (the "Intercompany Agreement"), the
prior written consent of Travelers Group is required in connection with these
and other corporate actions by the Company until such time as Travelers Group
and its subsidiaries (except the Company and its subsidiaries) no longer control
at least 20% of the combined voting power of the outstanding Common Stock or
cease beneficially to own at least 20% of the outstanding shares of Common
Stock.
7
<PAGE>
The Company has engaged in certain transactions, and is party to
arrangements, with Travelers Group and its affiliates, including the
Intercompany Agreement which governs certain relationships and transactions
between or among the Company, on the one hand, and Travelers Group and its
subsidiaries (other than the Company and its subsidiaries), on the other hand.
Certain of these arrangements required the approval of the Connecticut Insurance
Department. Pursuant to the Intercompany Agreement, among other things,
Travelers Group has granted to the Company and certain of its subsidiaries a
non-exclusive revocable license to use the "Travelers" name and certain
trademarks. Subject to Travelers Group's ability to revoke the license in
certain circumstances and to regulatory approval, the Intercompany Agreement
provides that: (i) within a limited time from the date on which Travelers Group
and its subsidiaries (excluding the Company and its subsidiaries) cease to
control more than 20% of the combined voting power of the outstanding Common
Stock, if the Company's name or any of its subsidiaries' names at such time
include the "Travelers" name, the Company and such subsidiaries are required to
change their names and will be required to discontinue the use of certain
related marks and (ii) after such date, the Company and its subsidiaries will
continue to have the right to use the "Travelers" name in connection with the
identification of property and casualty products for an initial five-year period
with an option to renew for an additional five years.
The Company may enter into other agreements with Travelers Group and its
other affiliates, which will not be the result of arms-length negotiations
between independent parties. Future arrangements and agreements with Travelers
Group and its affiliates to which the Company and its subsidiaries may become
party may be subject to the approval of the Connecticut Insurance Department or
other regulatory bodies. Conflicts of interest could arise in the future with
respect to material transactions involving Travelers Group or its affiliates
(other than the Company), on the one hand, and the Company, on the other hand.
Seven of the nine persons who are members of the Company's Board of Directors
also serve as directors of Travelers Group and certain members of the Company's
management who are full-time employees of the Company also hold certain offices
at Travelers Group and its other affiliates. Ownership interests of directors or
officers of the Company in common stock of Travelers Group or service as a
director or officer of both the Company and Travelers Group could create or
appear to create potential conflicts of interest when directors and officers are
faced with decisions that could have different implications for the Company and
Travelers Group.
The Company's Restated Certificate of Incorporation (the "Charter") provides
that Travelers Group shall have no duty to refrain from (i) engaging in the same
or similar business activities or lines of business as the Company, (ii) doing
business with any client or customer of the Company, subject to any contractual
provision to the contrary, or (iii) employing or otherwise engaging any officer
or employee of the Company. Accordingly, neither Travelers Group nor any officer
or director of Travelers Group (except as provided in the Charter) will be
liable to the Company or to its stockholders for breach of any fiduciary duty by
reason of any such activities.
The failure of Travelers Group and its affiliates to maintain beneficial
ownership of more than 50% of the combined voting power of the Company's
outstanding voting stock would be an event of default under the Company's
revolving credit facility.
By virtue of its ownership of approximately 98.1% of the combined voting
power of the outstanding Common Stock and approximately 83.4% of the outstanding
shares of Common Stock, Travelers Group includes the Company in its consolidated
tax return for federal income tax purposes. Under applicable law, each member of
the Travelers Group consolidated group, which includes Travelers Group, the
Company and certain of Travelers Group's other subsidiaries, is jointly and
severally liable for the federal income tax liability of each other member of
the group and is also jointly and severally liable for pension and benefit
funding and termination liabilities of other group members, as well as certain
benefit plan taxes. If the Company were no longer to be included in Travelers
Group's consolidated group for federal tax purposes, there is no assurance that
the Company's tax position would be as favorable as it is at present.
8
<PAGE>
In addition, by virtue of its controlling beneficial ownership of the
Company and the terms of a tax sharing agreement among the Company, TIGI and
Travelers Group (the "Tax Sharing Agreement"), Travelers Group will effectively
control all of the Company's tax decisions. Under the Tax Sharing Agreement,
Travelers Group will have sole authority to respond to and conduct all tax
proceedings (including tax audits) relating to the Company, to file all returns
on behalf of the Company and to determine the amount of the Company's liability
to (or entitlement to payment from) TIGI under the Tax Sharing Agreement. This
arrangement may result in conflicts of interests between the Company and
Travelers Group. For example, under the Tax Sharing Agreement, Travelers Group
may choose to contest, compromise or settle any adjustment or deficiency
proposed by the relevant taxing authority in a manner that may be beneficial to
Travelers Group and detrimental to the Company. In connection therewith,
however, Travelers Group is obligated under the Tax Sharing Agreement to act in
good faith with regard to all members included in the applicable returns.
REGULATION
The Company is subject to extensive regulation and supervision in the
jurisdictions in which it does business. Such regulation is generally designed
to protect the interests of policyholders, as opposed to stockholders and other
investors. Such regulation relates to authorized lines of business, capital and
surplus requirements, investment parameters, underwriting limitations,
transactions with affiliates, dividend limitations, changes in control, premium
rates and a variety of other financial and nonfinancial components of an
insurance company's business. The Company is also subject to regulatory and
legal proceedings that involve specific aspects of the conduct of the Company's
business.
The capacity for an insurance company's growth in premiums is in part a
function of its statutory surplus. Maintaining appropriate levels of statutory
surplus, as measured by statutory accounting practices and procedures, is
considered important by state insurance regulatory authorities and the private
agencies that rate insurers' claims-paying abilities and financial strength.
Failure to maintain certain levels of statutory surplus could result in
increased regulatory scrutiny, action by state regulatory authorities or a
downgrade by rating agencies.
The National Association of Insurance Commissioners ("NAIC") has adopted a
system of assessing minimum capital adequacy, which system is applicable to the
Company's insurance subsidiaries. This system, known as risk-based capital
("RBC"), is used to identify companies that merit further regulatory action by
comparing adjusted surplus to the required surplus, which reflects the risk
profile of the insurer. At December 31, 1996, the RBC ratios of the Company's
insurance subsidiaries were in excess of levels that would require regulatory
action.
In recent years the state insurance regulatory framework has come under
increased federal scrutiny, and certain state legislatures have considered or
enacted laws that altered and, in many cases, increased state authority to
regulate insurance companies and insurance holding companies. Further, the NAIC
and state insurance regulators are reexamining existing laws and regulations,
specifically focusing on investment laws for insurers, modifications to holding
company regulations, codification of statutory accounting practices, RBC
guidelines, interpretations of existing laws and the development of new laws. In
addition, Congress and certain federal agencies are investigating the current
condition of the insurance industry in the United States to determine whether to
impose federal regulation. The Company cannot predict with certainty the effect
any proposed or future legislation or NAIC initiatives may have on the conduct
of the Company's business or the financial condition or results of operations of
the Company.
Congress has considered and continues to consider several proposals to
revise the Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA" or "Superfund"). It is not possible to predict whether such proposed
legislation will be enacted, what form such legislation might take, or the
potential effects such legislation may have on the Company and its competitors.
9
<PAGE>
COMPETITION
The property and casualty insurance business is highly competitive and the
Company believes that it will remain highly competitive with little prospect for
periods of dramatically improved pricing in the foreseeable future. The residual
effects of the recession in the early 1990s, coupled with a demand for low-cost,
high quality service, have created difficult conditions in the domestic property
and casualty market, as is evidenced by a leveling or reduction in premium rates
in certain lines of business in which the Company competes. The Company competes
with domestic and foreign insurers, some of which have greater financial
resources than the Company. Competition is based on many factors, including the
perceived overall financial strength of the insurer, pricing and other terms and
conditions of products offered, levels of customer service (including the speed
with which claims are paid) and experience in the business. The Company competes
with insurance companies that use captive agents or salaried employees to sell
their products. Because these companies generally do not pay commissions, they
may be able to obtain business at a lower cost than the Company, which sells its
products primarily through independent agents and brokers.
Several property and casualty insurers writing commercial lines of business,
including the Company, now offer products for alternative forms of risk
protection in addition to traditional insurance products. These products,
including large deductible programs and various forms of self-insurance that
utilize captive insurance companies and risk retention groups, have been
instituted in reaction to the escalating cost of insurance caused in part by
increased jury awards in third-party liability and workers' compensation cases.
It is not possible to predict how continued growth in alternative forms of risk
protection will affect the Company's future operations.
RATINGS
Claims-paying and financial strength ratings have become an increasingly
important factor in establishing the competitive position of insurance
companies. Each of the rating agencies reviews its ratings periodically, and
there can be no assurance that current ratings will be maintained in the future.
A significant downgrade in such ratings could have a material adverse effect on
the results of operations and financial condition of the Company. The ratings
are not in any way a measure of protection offered to investors in the Class A
Common Stock and should not be relied upon with respect to making an investment
in the Class A Common Stock. The following table summarizes the current
claims-paying and financial strength ratings of the Company's property-casualty
insurance pools and Travelers Casualty and Surety Company of America ("Travelers
C&S of America") by A. M. Best, Duff & Phelps Corp. ("Duff & Phelps"), Moody's
Investor's Service Inc. ("Moody's") and Standard & Poor's Ratings Group
("Standard & Poor's"). The table also presents the position of each rating in
the applicable agency's rating scale.
<TABLE>
<CAPTION>
STANDARD &
A. M. BEST DUFF & PHELPS MOODY'S POOR'S
------------------- -------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
Travelers Property Casualty A (3rd of 15)
pool(1).................. AA- (4th of 18) Aa3 (4th of 19) A+ (5th of 18)
Gulf pool(2)............... A+ (2nd of 15) -- -- AA (3rd of 18)
Travelers C&S of America... A+ (2nd of 15) AA- (4th of 18) Aa3 (4th of 19) A+ (5th of 18)
</TABLE>
- ------------------------------
(1) The Travelers Property Casualty pool consists of The Travelers Indemnity
Company, Travelers Casualty and Surety Company, The Phoenix Insurance
Company, The Standard Fire Insurance Company, Travelers Casualty and Surety
Company of Illinois, Farmington Casualty Company, The Travelers Indemnity
Company of Connecticut, The Automobile Insurance Company of Hartford,
Connecticut, The Charter Oak Fire Insurance Company, The Travelers Indemnity
Company of America, The Travelers Indemnity Company of Missouri, Travelers
Casualty Company of Connecticut, Travelers Commercial Insurance Company, The
Travelers Indemnity Company of Illinois, Travelers Property Casualty
Insurance Company, TravCo Insurance Company, The Travelers Home and Marine
Insurance Company, Travelers Personal Security Insurance Company, Travelers
Property Casualty Insurance Company of Illinois and Travelers Excess and
Surplus Lines Company.
10
<PAGE>
(2) The Gulf pool consists of Gulf Insurance Company, Gulf Underwriters
Insurance Company, Select Insurance Company, Atlantic Insurance Company and
Gulf Group Lloyds.
EFFECT ON PUBLIC MARKET OF STOCK ELIGIBLE FOR FUTURE SALE
All of the shares of Class A Common Stock sold hereby will be freely
tradeable without restrictions by persons other than "affiliates" of the
Company. All of the outstanding shares of Class B Common Stock held by TIGI and
the 13,200,206 shares of Class A Common Stock held by the Selling Stockholders
following the offering contemplated hereby (12,200,206 shares if the
Underwriters' over-allotment option is exercised in full) will continue to be
"restricted securities" as defined in Rule 144 under the Securities Act of 1933,
as amended (the "Securities Act"). Shares of Class B Common Stock will
automatically convert into shares of Class A Common Stock upon their transfer to
any person other than Travelers Group or any of its subsidiaries (other than the
Company and its subsidiaries), except if shares of Class B Common Stock
representing more than a 50% economic interest in the Company are transferred
and except in certain other limited circumstances. To the extent such shares of
Class B Common Stock are "restricted securities" at the time of such transfer,
the shares of Class A Common Stock delivered upon such transfer will also be
"restricted securities." See "Description of Capital Stock."
TIGI has registration rights with respect to its shares of Class B Common
Stock. The Selling Stockholders have registration rights with respect to their
remaining shares of Class A Common Stock. The Selling Stockholders have agreed
not to transfer their shares until March 15, 1998 (subject to early termination
under certain circumstances) other than to affiliates, as may be required by
regulatory authorities or as may be consented to by the Company. The Company,
certain executive officers and directors of the Company, TIGI and each of the
Selling Stockholders have agreed, subject to certain limited exceptions, not to
offer, sell, contract to sell or otherwise dispose of any Common Stock (or any
securities convertible into or exercisable or exchangeable for Common Stock) or
grant any options or warrants to purchase Common Stock for a period of 90 days
after the date of this Prospectus or until March 15, 1998, whichever is later
(but in no event later than 120 days after the date of this Prospectus), without
the prior written consent of Smith Barney Inc. and J.P. Morgan Securities Inc.
Travelers Group has indicated that it does not currently intend to sell its
shares of Class B Common Stock in the near future. No prediction can be made as
to the effect, if any, that future sales of shares of Common Stock, or the
availability of shares of Common Stock for future sales, will have on the market
price of the shares of Class A Common Stock prevailing from time to time. Sales
of substantial amounts of Class A Common Stock in the public market, or the
perception that such sales could occur, could adversely affect the prevailing
market price of the Class A Common Stock or the ability of the Company to raise
capital through public offerings of its equity securities. See "Underwriting."
USE OF PROCEEDS
All of the shares of Class A Common Stock being offered hereby are being
offered by the Selling Stockholders. The Company will not receive any of the
proceeds from the sale of such Class A Common Stock by the Selling Stockholders.
11
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Class A Common Stock is listed on the NYSE under the symbol "TAP." There
is no established public trading for the Class B Common Stock. The high and low
sale prices, as reported on the consolidated transaction reporting system, for
the Class A Common Stock for the periods indicated, and the dividends per share
for both the Class A Common Stock and the Class B Common Stock, are set forth
below.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
------- ------- -----------
<S> <C> <C> <C>
1996
Second Quarter*... $28 1/2 $26 --
Third Quarter..... 29 3/8 23 1/8 $ 0.075
Fourth Quarter.... 36 28 0.075
1997
First Quarter..... 39 5/8 31 3/4 0.075
Second Quarter.... 40 3/8 31 3/8 0.075
Third Quarter..... 43 9/16 37 7/8 0.075
Fourth
Quarter**....... 41 35 9/16 --
</TABLE>
- ------------------------
* From April 23, 1996.
** Through October 23, 1997.
RECENT OPERATING RESULTS AND DEVELOPMENTS
THIRD QUARTER RESULTS
For the quarter ended September 30, 1997, the Company's net income increased
to $327 million, or $0.83 per share, compared to $247 million, or $0.62 per
share, in the third quarter of 1996. Excluding net realized investment gains,
earnings were $290 million in the third quarter of 1997, up from $246 million in
the third quarter of 1996. These increases were primarily due to higher net
investment income, lower catastrophe losses and favorable loss experience in
personal auto lines during the quarter. There were no catastrophe losses, after
taxes and reinsurance, for the three months ended September 30, 1997 compared to
$36 million for the three months ended September 30, 1996.
Revenues for the quarter ended September 30, 1997 totaled $2.507 billion
compared to $2.452 billion for the third quarter of 1996. Earned premiums of
$1.806 billion were down $12 million from the prior year period and fee income
of $90 million decreased $11 million from the prior year period. These decreases
were more than offset by increases in net investment income of $34 million and
realized investment gains of $56 million.
Net written premiums in the National Accounts market were $151 million in
the third quarter of 1997 compared with $241 million in the third quarter of
1996. This decrease was due to National Accounts writing less premium-based
product versus service fee based product and the competitive marketplace. Net
written premiums in the Commercial Accounts market were $502 million in the
third quarter of 1997 compared with $451 million in the third quarter of 1996,
reflecting continued growth in programs designed to leverage underwriting
expertise in specific industries. The Company has continued to be selective in
renewal activity in this highly competitive market. Select Accounts experienced
modest premium growth to $354 million in the quarter, while Specialty Accounts
had a slight decline in premium volume to $169 million in the quarter.
Personal Lines net written premiums for the quarter ended September 30, 1997
totaled $775 million compared to $668 million for the quarter ended September
30, 1996. This increase primarily reflects
12
<PAGE>
growth in target markets, including in alternative distribution channels,
partially offset by reductions due to catastrophe management strategies.
The overall statutory combined ratio before policyholder dividends in the
third quarter of 1997 was 102.6% compared to 106.7% in the third quarter of
1996.
RECENT DEVELOPMENT
The Company recently finalized an agreement with certain underwriters of
Lloyd's and certain London companies to settle their pending arbitration
regarding reinsurance recoveries for certain asbestos claims and related claim
adjustment expenses. The outcome of this agreement will result in no charge to
earnings.
13
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected consolidated financial information presented below is derived
from and should be read in conjunction with the consolidated financial
statements of the Company and its subsidiaries filed with the Securities and
Exchange Commission (the "Commission") on Forms 10-K and 10-Q and incorporated
by reference herein. Such financial statements as of and for the year ended
December 31, 1996 have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The consolidated financial statements for the six
months ended June 30, 1997 and 1996 are unaudited but, in the Company's opinion,
reflect all adjustments consisting of normal recurring adjustments necessary for
a fair presentation of the financial position and results of operations for such
periods. The results of operations for the six months ended June 30, 1997 may
not be indicative of results of operations to be expected for a full year. See
"Incorporation of Certain Information By Reference."
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
-----------------------
<S> <C> <C> <C>
1997 1996 (1) 1996 (1)
-------- -------- ------------
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Premiums................................................................... $ 3,612 $ 2,493 $ 6,028
Net investment income...................................................... 1,007 668 1,656
Fee income................................................................. 188 194 455
Total revenues............................................................. 4,862 3,354 8,197
Total claims and expenses.................................................. 4,079 3,590 7,710
Income (loss) before federal income taxes.................................. 783 (236) 487
Net income (loss).......................................................... 549 (118) (2) 391(2)
Net income (loss) per share of common stock (3)............................ 1.38 (0.36) 1.05
Weighted average number of common shares
outstanding and common stock equivalents................................. 399.0 334.3 367.1
BALANCE SHEET DATA (AT PERIOD END):
Total investments.......................................................... $ 29,584 $ 27,592 $29,364
Total assets............................................................... 49,901 50,386 49,779
Claims and claim adjustment expense reserves............................... 30,726 32,347 31,177
Long-term debt............................................................. 1,249 700 1,249
Company-obligated mandatorily redeemable preferred securities of subsidiary
trusts holding solely junior subordinated debt securities of the
Company.................................................................. 900 900 900
Stockholders' equity (4)................................................... 6,701 5,760 6,480
OTHER DATA:
Cash dividends per share................................................... $ 0.15 -- $ 0.15
GAAP Combined Ratio Data:
Loss and LAE ratio....................................................... 72.8% 97.4% 83.6%
Underwriting expense ratio............................................... 28.6 34.2 33.2
Combined ratio before policyholder dividends (5)......................... 101.4 131.6 116.8
</TABLE>
- ------------------------------
(1) Includes amounts related to Aetna only from April 2, 1996, the date of the
Acquisition.
(2) The Company recognized $391 million and $423 million in after-tax charges
related to the Acquisition for the six months ended June 30, 1996 and the
year ended December 31, 1996, respectively. Excluding realized investment
gains (losses) and acquisition-related charges, the Company's operating
income for the six months ended June 30, 1996 and the year ended December
31, 1996 was $294 million and $802 million, respectively.
(3) Net income 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 stock equivalents outstanding during the period. For
purposes of the computation of net income per share, the weighted average
number of common shares and common stock equivalents was
14
<PAGE>
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.
(4) Stockholders' equity at June 30, 1997, December 31, 1996 and June 30, 1996
reflects $280 million, $285 million and $0 million, respectively, of net
unrealized gains on investment securities pursuant to Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities."
(5) The 1996 combined ratios before policyholder dividends include the effect of
net charges associated with the Acquisition. For the six months ended June
30, 1996 and the year ended December 31, 1996, the combined ratios excluding
such charges were 109.1% and 107.0%, respectively. 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. The 1996 GAAP combined ratios have been
restated to conform to the 1997 presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The results of operations presented in this section reflect the consolidated
results of operations of the Company for the six months ended June 30, 1997 and
1996. For purposes of this section, "TAP" refers to Travelers Property Casualty
Corp. and the "Company" refers to TAP and its subsidiaries. The information set
forth below should be read in conjunction with the Consolidated Financial
Statements and related Notes thereto incorporated by reference herein. See
"Incorporation of Certain Information by Reference."
On April 2, 1996, TAP purchased from Aetna all of the outstanding capital
stock of Travelers Casualty and Surety company (formerly 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 the 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 SIX MONTHS ENDED JUNE 30, 1997 AND
1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED
<S> <C> <C>
JUNE 30,
--------------------
(IN MILLIONS, EXCEPT PER SHARE DATA) 1997 1996
- ----------------------------------------------------------------------- --------- ---------
Revenues............................................................... $ 4,862 $ 3,354
--------- ---------
--------- ---------
Net Income (loss)...................................................... $ 549 $ (118)
--------- ---------
--------- ---------
Earnings per share:
Net Income (loss)...................................................... $ 1.38 $ (0.36)
--------- ---------
--------- ---------
Weighted average number of common
shares outstanding and common stock equivalents...................... 399.0 334.3
--------- ---------
</TABLE>
CONSOLIDATED RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
1996
Net income for the six months ended June 30, 1997 was $549 million or $1.38
per share compared to a net loss of $118 million or $0.36 per share for the six
months ended June 30, 1996. Excluding realized investment gains (losses) and
acquisition-related charges, operating income was $548 million or $1.37 per
share for the six months ended June 30, 1997 compared to $294 million or $0.87
per share for the six months ended June 30, 1996. The increase in operating
income in the six months ended June 30, 1997 compared to the six months ended
June 30, 1996 was due to the inclusion in 1997 of Aetna P&C for the
15
<PAGE>
entire six months compared to only the second quarter in 1996, higher net
investment income, continued favorable prior year reserve development in
personal auto lines, continuing benefits of expense reductions associated with
the Acquisition and lower catastrophe losses.
Revenues of $4.862 billion in the first six months of 1997 increased $1.508
billion from $3.354 billion in the first six months of 1996. This increase was
primarily attributable to a $1.119 billion increase in earned premiums and a
$339 million increase in net investment income, primarily reflecting the
inclusion in 1997 of Aetna P&C for the entire six months compared to only the
second quarter in 1996.
National Accounts within Commercial Lines is the primary source of fee
income due to its service business. Fee income for the first six months of 1997
was $188 million, a $6 million decrease from the first six months of 1996. This
decrease in fee income was due to the depopulation of involuntary pools as the
loss experience of workers' compensation improves and insureds move 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 service customers.
Claims and expenses of $4.079 billion for the first six months of 1997
increased $489 million from the first six months of 1996. The increase was
primarily attributable to the inclusion in 1997 of Aetna P&C for the entire six
months compared to only the second quarter in 1996, partially offset by expense
reductions.
The Company's effective tax rate was 30% for the first six months of 1997
and 50% for the first six months of 1996. The tax rate on net income for the
first six months of 1997 was less than the statutory rate of 35% primarily due
to non-taxable investment income. The tax rate on the net loss for the first six
months of 1996 reflects a tax benefit that is greater than the statutory rate
primarily due to non-taxable investment income.
The overall statutory and GAAP combined ratios were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
------------------- -------------------
<S> <C> <C>
Statutory:
Loss and LAE ratio..................................................... 73.2% 100.1%
Underwriting expense ratio............................................. 29.1 31.7
Combined ratio before policyholder dividends........................... 102.3 131.8
Combined ratio......................................................... 102.9 132.2
GAAP:
Loss and LAE ratio..................................................... 72.8% 97.4%
Underwriting expense ratio............................................. 28.6 34.2
Combined ratio before policyholder dividends........................... 101.4 131.6
Combined ratio......................................................... 101.9 132.1
</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. In addition, the purchase accounting adjustments recorded for GAAP in
connection with the Acquisition resulted in a statutory charge in 1996.
The decrease in the first six months of 1997 overall statutory and GAAP
combined ratios before policyholder dividends from the first six months of 1996
was primarily attributable to charges taken in the second quarter of 1996
related to the acquisition and integration of Aetna P&C. Excluding these
amounts, the statutory and GAAP combined ratios before policyholder dividends
for the six months ended June 30, 1996 would have been 108.0% and 109.1%,
respectively. The decrease in the first six months of 1997 statutory and GAAP
combined ratios from the first six months of 1996 statutory and GAAP combined
16
<PAGE>
ratios excluding acquisition-related changes was generally due to the inclusion
in 1997 of Aetna P&C's results for the entire six months compared to only the
second quarter in 1996. Aetna P&C has historically had a higher underwriting
expense ratio, partially offset by a lower loss ratio, which reflects the mix of
business including the favorable effect of the lower loss ratio of the Bond
business. In addition, the first six months of 1997 statutory and GAAP combined
ratios were lower than the first six months of 1996 statutory and GAAP combined
ratios excluding acquisition-related charges due to the favorable prior year
reserve development in personal auto lines, lower catastrophe losses and expense
reductions.
SEGMENT RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
COMMERCIAL LINES
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
(IN MILLIONS) JUNE 30, 1997 JUNE 30, 1996
- ---------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Revenues.................................................................... $ 3,236 $ 2,220
Net Income (loss)........................................................... $ 410 $ (161)
</TABLE>
Net income in the first six months of 1997 was $410 million compared to a
net loss of $161 million in the first six months of 1996. Excluding realized
investment gains (losses) and acquisition-related charges, Commercial Lines
operating earnings were $403 million in the six months ended June 30, 1997
compared to $237 million in the six months ended June 30, 1996. This increase
was due to the inclusion in 1997 of Aetna P&C for the entire six months compared
to only the second quarter in 1996, higher net investment income and expense
savings associated with the acquisition and integration of Aetna P&C.
Commercial Lines net written premiums in the first six months of 1997
totaled $2.479 billion, up $760 million from $1.719 billion in the first six
months of 1996 (excluding an adjustment associated with a reinsurance
transaction in 1996), reflecting the inclusion in 1997 of Aetna P&C for the
entire six months compared to only the second quarter of 1996 and a $142 million
increase due to a change to conform Aetna P&C's method with The Travelers
Indemnity Company and its subsidiaries' ("Travelers P&C") method of recording
certain net written premiums within Commercial Lines. This was offset in part by
the highly competitive conditions in the marketplace and the Company's
continuing focus on writing profitable business.
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 in
the first six months of 1997 totaled $2.479 billion, up $155 million from $2.324
billion in the first six months of 1996. This increase was primarily
attributable to the change to conform the Aetna P&C method with the Travelers
P&C method of recording net written premiums.
Fee income for the first six months of 1997 was $188 million, a $6 million
decrease from the first six months of 1996. This decrease was the result of the
depopulation of involuntary pools as the loss experience of workers'
compensation improves and insureds move to voluntary markets, the Company's
selective renewal activity and success in lowering workers' compensation losses,
partially offset by the Acquisition.
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 $371 million in the first six months of 1997 compared to
$425 million in the first six months of 1996. This decrease reflected the
competitive marketplace. National Accounts new business in the first six months
of 1997 was virtually the same as the first six months of 1996.
17
<PAGE>
National Accounts business retention ratio was significantly higher in the first
six months of 1997 compared to the first six months of 1996, reflecting an
unusually low retention ratio in the first quarter of 1996.
Commercial Accounts serves mid-sized businesses through a network of
independent agencies 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 $1.014 billion in the first six months of
1997 compared to $821 million in the first six months of 1996. This increase
reflected $127 million due to the change to conform the Aetna P&C method with
the Travelers P&C method of recording certain net written premiums and the
continued growth through programs designed to leverage underwriting experience
in specific industries, partially offset by the competitive marketplace. For the
first six months of 1997, new premium business in Commercial Accounts has
significantly improved compared to the first six months of 1996, reflecting
continued growth in programs designed to leverage underwriting experience in
specific industries. The Commercial Accounts business retention ratio in the
first six months of 1997 has significantly improved compared to the first six
months 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 $733 million in the first six months of 1997 were $2 million above
the premium levels for the first six months of 1996. This increase reflected $15
million due to the change to conform the Aetna P&C method with the Travelers P&C
method 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 first six months of 1997 compared to the first six
months of 1996, reflecting an increase due to the Acquisition, partially offset
by a decrease due to the competitive marketplace. The Select Accounts business
retention ratio was moderately higher in the first six months of 1997 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 $361 million in the first six
months of 1997 compared to $347 million in the first six months of 1996. The
growth is primarily attributable to increased writings of its excess and surplus
lines business.
Commercial Lines claims and expenses of $2.660 billion in the first six
months of 1997 increased $146 million from the first six months of 1996. This
increase was primarily attributable to the inclusion in 1997 of Aetna P&C for
the entire six months compared to only the second quarter in 1996, partly offset
by the net acquisition-related charges and financing costs associated with the
Acquisition in 1996.
Catastrophe losses, net of taxes and reinsurance, were $5 million and $6
million in the first six months of 1997 and 1996, respectively. The 1997
catastrophe losses were primarily due to tornadoes in the Midwest in the first
quarter. The 1996 catastrophe losses were primarily due to winter storms in the
first quarter.
18
<PAGE>
Statutory and GAAP combined ratios for Commercial Lines were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
------------------- -------------------
<S> <C> <C>
Statutory:
Loss and LAE ratio........................................................ 79.8% 117.9%
Underwriting expense ratio................................................ 29.5 33.4
Combined ratio before policyholder dividends.............................. 109.3 151.3
Combined ratio............................................................ 110.3 151.9
GAAP:
Loss and LAE ratio........................................................ 79.1% 113.1%
Underwriting expense ratio................................................ 29.4 37.4
Combined ratio before policyholder dividends.............................. 108.5 150.5
Combined ratio............................................................ 109.3 151.3
</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. In addition, the purchase accounting adjustments
recorded for GAAP in connection with the Acquisition resulted in a statutory
charge in 1996.
The decreases in the first six months of 1997 statutory and GAAP combined
ratios for Commercial Lines compared to the first six months of 1996 were
primarily attributable to the 1996 charges related to the acquisition and
integration of Aetna P&C. Excluding these amounts, the statutory and GAAP
combined ratios before policyholder dividends for the six months ended June 30,
1996 would have been 112.0% and 113.1% respectively. The decrease in the first
six months of 1997 statutory and GAAP combined ratios compared to the first six
months of 1996 statutory and GAAP combined ratios excluding acquisition-related
charges was generally due to the inclusion in 1997 of Aetna P&C's results for
the entire six months compared to only the second quarter in 1996. Aetna P&C has
historically had a higher underwriting expense ratio, partially offset by a
lower loss ratio, which reflects the mix of business including the favorable
effect of the lower loss ratio of the Bond business.
PERSONAL LINES
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
(IN MILLIONS) JUNE 30, 1997 JUNE 30, 1996
- ---------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Revenues.................................................................... $ 1,620 $ 1,122
Net Income.................................................................. $ 202 $ 74
</TABLE>
Net income in the first six months of 1997 of $202 million increased $128
million from $74 million in the first six months of 1996. Excluding realized
investment gains (losses) and the acquisition-related charges, Personal Lines
operating income was $209 million in the first six months of 1997 compared to
$87 million in the first six months of 1996. These increases primarily reflect
the inclusion in 1997 of Aetna P&C for the entire six months compared to only
the second quarter in 1996, reduced catastrophe losses, lower expenses and
continued favorable prior year reserve development in personal auto lines.
Net written premiums in the first six months of 1997 were $1.520 billion,
compared to $1.017 billion in the first six months of 1996. This increase
primarily reflects the Acquisition and, to a lesser extent, lower ceded premiums
due to a change in a reinsurance arrangement in January 1997, growth in target
markets served by independent agents and growth in the affinity marketing and
TRAVELERS SECURE-Registered Trademark- programs. Business retention continued to
be strong. 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 six months of 1996 totaled $1.333 billion.
19
<PAGE>
Personal Lines claims and expenses of $1.316 billion in the first six months
of 1997 increased $299 million from the first six months of 1996. This increase
was primarily attributable to the inclusion of Aetna P&C's operations for the
entire six months of 1997 compared to only the second quarter of 1996, partially
offset by expense reductions. Catastrophe losses, after taxes and reinsurance,
were $5 million in the first half of 1997 compared to $32 million in the first
half of 1996. The 1996 catastrophe losses were primarily from first quarter
winter storms and second quarter hail and wind storms.
Statutory and GAAP combined ratios for Personal Lines were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
------------------- -------------------
<S> <C> <C>
Statutory:
Loss and LAE ratio........................................................ 63.1% 73.0%
Underwriting expense ratio................................................ 28.4 28.9
Combined ratio............................................................ 91.5 101.9
GAAP:
Loss and LAE ratio........................................................ 63.1% 73.4%
Underwriting expense ratio................................................ 27.3 29.2
Combined ratio............................................................ 90.4 102.6
</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.
The decrease in the combined ratios in 1997 compared to 1996 was due to the
favorable prior year reserve development in personal auto lines, lower
catastrophe losses and expense reductions.
CORPORATE AND OTHER
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
(IN MILLIONS) JUNE 30, 1997 JUNE 30, 1996
- ---------------------------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Revenues.................................................................... $ 6 $ 12
Net income (loss)........................................................... $ (63) $ (31)
</TABLE>
The primary component of net income (loss) for the six months ended June 30,
1997 and 1996 was interest expense of $52 million and $25 million after tax,
respectively, reflecting financing costs associated with the Acquisition in the
second quarter of 1996.
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 June 30, 1997, approximately 15% of the net
environmental reserve (i.e., approximately $182 million) is case reserves for
resolved claims. The balance, approximately 85% of the net environmental reserve
(i.e., approximately $1.041 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.
20
<PAGE>
The following table displays activity for environmental losses and loss
expenses and reserves for the six months ended June 30, 1997 and 1996.
ENVIRONMENTAL LOSSES
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
(IN MILLIONS) JUNE 30, 1997 JUNE 30, 1996
- ---------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Beginning reserves:
Direct.................................................................... $ 1,369 $ 454
Ceded..................................................................... (127) (50)
------ ------
Net..................................................................... 1,242 404
Acquisition of Aetna P&C:
Direct.................................................................... -- 938
Ceded..................................................................... -- (24)
Incurred losses and loss expenses:
Direct.................................................................... 38 38
Ceded..................................................................... (2) (2)
Losses paid:
Direct.................................................................... 100 63
Ceded..................................................................... (45) (20)
Ending reserves:
Direct.................................................................... 1,307 1,367
Ceded..................................................................... (84) (56)
------ ------
Net..................................................................... $ 1,223 $ 1,311
------ ------
------ ------
</TABLE>
ASBESTOS CLAIMS
At June 30, 1997, approximately 24% of the net asbestos reserve (i.e.,
approximately $257 million) is for pending asbestos claims. The balance,
approximately 76% (i.e., approximately $808 million) of the net asbestos
reserves, represents incurred but not yet reported losses.
21
<PAGE>
The following table displays activity for asbestos losses and loss expenses
and reserves for the six months ended June 30, 1997 and 1996. In general, the
Company posts case reserves for pending asbestos claims within approximately 30
business days of receipt of such claims.
ASBESTOS LOSSES
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
(IN MILLIONS) JUNE 30, 1997 JUNE 30, 1996
- ----------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Beginning reserves:
Direct..................................................................... $ 1,443 $ 695
Ceded...................................................................... (370) (293)
------ ------
Net...................................................................... 1,073 402
Acquisition of Aetna P&C:
Direct..................................................................... -- 776
Ceded...................................................................... -- (116)
Incurred losses and loss expenses:
Direct..................................................................... 37 49
Ceded...................................................................... (14) 16
Losses paid:
Direct..................................................................... 89 65
Ceded...................................................................... (58) (36)
Ending reserves:
Direct..................................................................... 1,391 1,455
Ceded...................................................................... (326) (357)
------ ------
Net...................................................................... $ 1,065 $ 1,098
------ ------
------ ------
</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 June 30, 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.
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
22
<PAGE>
products or substances include, but are not limited to, lead paint, pesticides,
pharmaceutical products, silicone-based personal products, solvents and other
deleterious substances.
At June 30, 1997, approximately 18% of the net CIOTA reserve (i.e.,
approximately $204 million) is for pending CIOTA claims. The balance,
approximately 82% (i.e., approximately $901 million) of the net CIOTA reserves,
represents incurred but not yet reported losses for which the Company has not
received any specific claims.
The following table displays activity for CIOTA losses and loss expenses and
reserves for the six months ended June 30, 1997 and 1996. In general, the
Company posts case reserves for pending CIOTA claims within approximately 30
business days of receipt of such claims.
CIOTA LOSSES
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
(IN MILLIONS) JUNE 30, 1997 JUNE 30, 1996
- ---------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Beginning reserves:
Direct.................................................................... $ 1,560 $ 374
Ceded..................................................................... (446) -
------ ------
Net..................................................................... 1,114 374
Acquisition of Aetna P&C:
Direct.................................................................... -- 709
Ceded..................................................................... -- (293)
Incurred losses and loss expenses:
Direct.................................................................... 12 544
Ceded..................................................................... -- (160)
Losses paid:
Direct.................................................................... 36 36
Ceded..................................................................... (15) (4)
Ending reserves:
Direct.................................................................... 1,536 1,591
Ceded..................................................................... (431) (449)
------ ------
Net..................................................................... $ 1,105 $ 1,142
------ ------
------ ------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
TAP was formed in January 1996 to hold the property and casualty insurance
subsidiaries of TIGI. TIGI contributed to TAP all of the outstanding shares of
common stock of The Travelers Indemnity Company 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.
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
23
<PAGE>
June 30, 1997 totaled $29.6 billion, of which 85.8% was invested in fixed
maturity investments, 3.6% in mortgage loans and real estate held for sale, 3.3%
in common stocks and other equity securities and 7.3% in short-term and other
investments. The average duration of the fixed maturity portfolio, including
short-term investments, was 5.1 years at such date. Included in fixed maturity
investments are non-investment grade securities totaling $763 million,
representing approximately 3.0% of the Company's fixed maturity investments as
of June 30, 1997. The following table reflects the average yield (annualized) of
the investment portfolio excluding unrealized and realized investment gains and
losses:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
<S> <C> <C>
1997 1996
----- -----
Average Yield (Annualized).......................... 7.0% 7.0%
</TABLE>
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. The lender has no obligation to make any loan to
TAP under this line of credit. Also, TAP will continue to be able to borrow
under a $500 million five-year revolving credit facility with a syndicate of
banks that expires on December 19, 2001 (the "Credit Facility"). Under the
Credit Facility, TAP is required to maintain a certain level of consolidated
stockholders' equity (as defined in the agreement). At June 30, 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.
At June 30, 1997, there were no borrowings outstanding under this facility. 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 June 30, 1997, TAP had no commercial paper
outstanding.
At June 30, 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 $145 million of dividends from its insurance
subsidiaries during the first six months of 1997 and received an additional $100
million of dividends on July 1, 1997.
On June 23, 1997, the Company repurchased, in the aggregate, 6,600,102
shares of Class A Common Stock held by the Private Investors (as defined herein)
for a total purchase price of approximately $240.8 million, representing a
discount to the then current market price. The repurchases 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. On July 24, 1996, TAP's
Board of Directors had authorized the expenditure of up to $100 million for the
repurchase of Common Stock. This transaction satisfied the Company's previously
announced program to repurchase $100 million of its shares. The Company had
repurchased in the open market approximately 1.17 million shares under the
repurchase program, which was terminated.
On January 22, 1997, the Company, through the Travelers Property Casualty
Corp. Capital Accumulation Plan, issued 414,000 shares of the Class A Common
Stock and reissued 502,000 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 Common Stock at the date of
grant and is recognized as a charge to income ratably over the vesting period.
24
<PAGE>
SELLING STOCKHOLDERS
The shares of Class A Common Stock being offered hereby are being sold by
Aetna, J.P. Morgan Capital Corporation ("J.P. Morgan Capital"), The Trident
Partnership, L.P. ("Trident"), Fund American Enterprises Holdings, Inc. ("Fund
American") and Sixty Wall Street Fund, L.P. ("Sixty Wall Street") (collectively,
the "Selling Stockholders"). The following table sets forth information with
respect to the ownership of the Class A Common Stock by each Selling Stockholder
as of October 13, 1997. All information with respect to stock ownership (other
than percentage calculation) has been furnished to the Company by the respective
Selling Stockholders.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHARES OWNED SHARES OWNED CLASS OWNED
PRIOR TO SHARES TO BE AFTER OFFERING AFTER OFFERING
STOCKHOLDER OFFERING SOLD(1) (2) (3)
- --------------------------------------------- --------------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Aetna Services, Inc. ........................ 10,057,300 5,028,650 5,028,650 7.73%
J.P. Morgan Capital Corporation.............. 9,946,946 4,973,473 4,973,473 7.64
The Trident Partnership, L.P................. 3,771,488 1,885,744 1,885,744 2.90
Fund American Enterprises
Holdings, Inc. ............................ 2,514,325 1,257,163 1,257,162 1.93
Sixty Wall Street Fund, L.P. (4)............. 110,354 55,177 55,177 *
--------------- ------------ ---------------- -------
Total.................................... 26,400,413 13,200,207 13,200,206 20.28%
--------------- ------------ ---------------- -------
--------------- ------------ ---------------- -------
</TABLE>
- ------------------------------
* Less than 1%.
(1) Excludes 380,953, 376,772, 142,857, 95,238 and 4,180 shares as to which
Aetna, J.P. Morgan Capital, Trident, Fund American and Sixty Wall Street,
respectively, have granted the Underwriters an over-allotment option. See
"Underwriting."
(2) Except in limited circumstances, these shares of Class A Common Stock may
not be sold or otherwise transferred by the Selling Stockholders until March
15, 1998. Only 12,200,206 shares will be subject to this restriction if the
over-allotment option is exercised in full.
(3) Calculated on the basis of 65,094,830 shares of Class A Common Stock issued
and outstanding as of September 30, 1997. The Company also has outstanding
328,020,170 shares of Class B Common Stock, which represents approximately
83.4% of the outstanding shares of Common Stock. All of the issued and
outstanding shares of Class B Common Stock are held by TIGI. Because on all
matters submitted to a vote of stockholders, holders of Class A Common Stock
are entitled to one vote per share and holders of Class B Common Stock are
entitled to ten votes per share, the percentage of voting power for each of
the Selling Stockholders prior to and after the offering is less than 1%.
(4) Sixty Wall Street is an affiliate of J.P. Morgan Capital.
The Selling Stockholders acquired the Class A Common Stock being offered
hereby in connection with the Acquisition. As part of the financing of the
Acquisition and pursuant to separate stock purchase agreements, the Company sold
an aggregate of 33,000,515 shares of Class A Common Stock (representing
approximately 9% of its outstanding common stock at that time) to Aetna, J.P.
Morgan Capital, Trident and Fund American (collectively, the "Private
Investors") for an aggregate of $525 million. On June 23, 1997, the Company
repurchased in the aggregate 6,600,102 shares of Class A Common Stock held by
the Private Investors for a total purchase price of approximately $240.8
million, representing a discount to the then current market price. The
repurchases represented 20% of the holdings of each of the Private Investors.
Pursuant to the Shareholders Agreement, dated as of April 2, 1996, and
amended as of June 20, 1997, by and among the Company, TIGI, Aetna, J.P. Morgan
Capital, Trident and Fund American (the "Shareholders Agreement"), the Private
Investors have certain rights with respect to the ownership of Class A Common
Stock and the management of the Company. The Private Investors are collectively
entitled to a total of four demand registrations with respect to their shares of
Class A Common Stock and an unlimited number of "piggy back" registrations.
Private Investors owning more than 50% of the shares of Class A Common Stock
then owned in the aggregate by the Private Investors may demand by written
notice that the Company register no less than a number of shares the sale of
which is reasonably expected
25
<PAGE>
to yield gross proceeds of at least $60 million. The Company has agreed to
indemnify the Private Investors for certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the Private Investors may
be required to make in respect thereof, in connection with sales by the Private
Investors of shares of Class A Common Stock pursuant to a registration statement
prepared by the Company. Pursuant to the Shareholders Agreement, the Company has
agreed to pay all expenses in connection with each such registration, except
underwriting discounts and commissions applicable to the shares of Class A
Common Stock sold by the Private Investors. The offering hereby is as a result
of a demand delivered by the Private Investors on September 16, 1997 in
accordance with the terms of the Shareholders Agreement. After the offering
contemplated hereby, the Private Investors will be entitled to three remaining
demand registrations.
The nature of any position, office or other material relationship which the
Selling Stockholders have had within the past three years with the Company or
any of its predecessors or affiliates is set forth below.
John J. Byrne is a partner of BYRNE and Sons, L.P., which is a special
limited partner of Trident, and a director of the general partner of Trident.
Mr. Byrne, who is also Chairman of the Board of Fund American, has been a
director of the Company since 1996.
Roberto G. Mendoza, a Vice Chairman and a director of J.P. Morgan & Co.
Incorporated, has been a director of the Company since 1996. J.P. Morgan & Co.
Incorporated is the parent of J.P. Morgan Capital, J.P. Morgan Securities Inc.
and Sixty Wall Street. Mr. Mendoza was appointed to the Board of Directors of
the Company by Trident pursuant to its rights under the Shareholders Agreement.
The Shareholders Agreement provides that so long as the Private Investors
continue to beneficially own at least 52% of the shares of Class A Common Stock
purchased pursuant to certain stock purchase agreements, Trident shall have the
right to designate one nominee to the Board of Directors of the Company and TIGI
shall vote its shares of Common Stock in favor of such nominee. Pursuant to such
provision, Roberto G. Mendoza was nominated and serves as a director. Mr.
Mendoza's current term expires in 1998. Following the offering being made
hereby, the Private Investors will no longer own at least 52% of the shares of
Class A Common Stock originally purchased by them pursuant to such stock
purchase agreements. J.P. Morgan & Co. Incorporated is a special limited partner
in Trident and is one of the two investment advisors to Trident.
Frank J. Tasco, a director of Marsh & McLennan Companies, Inc. ("Marsh &
McLennan"), has been a director of the Company since 1996. Mr. Tasco has been a
director of Travelers Group since 1992. A subsidiary of Marsh & McLennan is a
special limited partner in Trident and a shareholder of the general partner of
Trident. Such subsidiary is one of the two investment advisors to Trident.
In connection with the Acquisition, Aetna agreed for a period of five years
not to compete with any of the Aetna P&C businesses as conducted in certain
countries, with certain limited exceptions. Aetna entered into a license
agreement with Aetna P&C that permits those companies and their subsidiaries to
use the "Aetna" name in connection with their operations through December 31,
1998. Aetna also agreed not to license the Aetna name to anyone else for use in
a property and casualty insurance business until after December 31, 2001.
Aetna Inc. and its subsidiaries continue to provide certain
telecommunications services to the Company and arrangements for the lease of
real property, among other things. During 1996, the Company paid to Aetna Inc.
approximately $38 million in respect of these and other administrative services
provided. From time to time, the Company has and may engage in transactions with
the Private Investors and their affiliates in the ordinary course of business.
The Private Investors and their affiliates have and may make investments in
or provide financial advisory and other services to insurance enterprises and
ventures or other entities that may compete with the Company. As a result, there
may currently exist, or may develop in the future, perceived or actual conflicts
of interest between the Private Investors or their affiliates, on the one hand,
and the Company, on the other hand.
26
<PAGE>
PRINCIPAL STOCKHOLDER
Travelers Group, through TIGI, owns all of the 328,020,170 shares of Class B
Common Stock and controls approximately 98.1% of the combined voting power of
the Common Stock and beneficially owns approximately 83.4% of the outstanding
shares of Common Stock.
Travelers Group and the Company entered into an Intercompany Agreement which
contains provisions relating to, among other things, license to use the
"Travelers" name and certain trademarks, indemnification, Travelers Group
consent to certain events, registration rights, certain business relationships
and real property. See "Risk Factors--Control By and Relationship with Travelers
Group; Conflicts of Interest."
Travelers Group is a financial services holding company engaged, through its
subsidiaries, principally in four business segments: (i) Investment Services;
(ii) Consumer Finance Services; (iii) Property & Casualty Insurance Services
(through the Company); and (iv) Life Insurance Services.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 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 $.10 per share (the "Preferred Stock").
The Charter provides for two classes of Common Stock and Preferred Stock. As
of September 30, 1997, the Company had outstanding 65,094,830 shares of Class A
Common Stock, 328,020,170 shares of Class B Common Stock and no outstanding
shares of Preferred Stock. As discussed above, TIGI owns all of the shares of
Class B Common Stock.
On all matters submitted to a vote of stockholders, holders of Class A
Common Stock are entitled to one vote per share and holders of Class B Common
Stock are entitled to ten votes per share. Both classes vote together as a
single class on all matters, except that the holders of Class A Common Stock are
entitled to vote as a separate class on, and must approve, any change to the
Charter modifying the terms of the Class A Common Stock and/or the Class B
Common Stock which change would adversely affect the relative rights of the
Class A Common Stock as compared to those of the Class B Common Stock and as
otherwise required by law.
Holders of Class A Common Stock and Class B Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors on the Common Stock out of funds legally available therefor, subject
to any preferential dividend rights of any outstanding Preferred Stock. Cash
dividends may be declared and paid to the holders of Class A Common Stock only
if at such time cash dividends in the same amount per share are declared and
paid to the holders of Class B Common Stock and vice versa. Upon the
liquidation, dissolution or winding up of the Company, the holders of Class A
Common Stock and Class B Common Stock are entitled to receive ratably the net
assets of the Company available after payment of all debts and other
liabilities, subject to the prior rights of any outstanding Preferred Stock.
Holders of Class A Common Stock and Class B Common Stock as such have no
preemptive, subscription, redemption or, except as provided below, conversion
rights, except for the limited equity purchase rights described below.
Pursuant to the Intercompany Agreement, the Company has agreed that to the
extent permitted by the principal national securities exchange in the United
States upon which the Common Stock is listed and so long as Travelers Group
controls at least 20% of the combined voting power of the outstanding Common
Stock or at least 50% of the issued and outstanding Common Stock, Travelers
Group or one of its affiliates (other than the Company and its subsidiaries) may
purchase its pro rata share (based on its then current percentage equity
interest in the Company) of any voting equity security issued by the Company
(excluding any such securities offered the Company pursuant to employee stock
options or other benefit plans, dividend reinvestment plans and other offerings
other than for cash). The exercise of such rights is currently prohibited by the
NYSE. The outstanding shares of Class A Common Stock and Class B Common Stock
are fully paid and non-assessable.
Each share of Class B Common Stock is convertible at any time while held by
Travelers Group or one of its subsidiaries (other than the Company or its
subsidiaries), or the Class B Transferee (as defined below) or any of its
subsidiaries, if any, at the option of the holder thereof, into one share of
Class A
27
<PAGE>
Common Stock. Except as provided below, any shares of Class B Common Stock
transferred to, or issued by the Company to, a person other than Travelers Group
or one of its affiliates (other than the Company and its subsidiaries) or the
Class B Transferee or any of its subsidiaries will automatically convert into
shares of Class A Common Stock upon such transfer on a share-for-share basis.
Shares of Class B Common Stock representing more than a 50% economic interest in
the Company transferred by Travelers Group or any of its subsidiaries in a
single transaction to one unrelated person (the "Class B Transferee") will not
automatically convert into shares of Class A Common Stock upon such transfer.
Any shares of Class B Common Stock retained by Travelers Group or any of its
subsidiaries following any such transfer to the Class B Transferee will
automatically convert into shares of Class A Common Stock upon such transfer.
UNDERWRITING
Each of the Underwriters named below (the "Underwriters"), for whom Smith
Barney Inc. ("Smith Barney") and J.P. Morgan Securities Inc. ("J.P. Morgan
Securities") are acting as the Representatives (the "Representatives"), has
severally agreed, subject to the terms and conditions of an Underwriting
Agreement among the several Underwriters, each of the Selling Stockholders and
the Company (the "Underwriting Agreement"), to purchase from the Selling
Stockholders shares of Class A Common Stock which equal the number of shares set
forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A
UNDERWRITERS COMMON STOCK
- ------------------------------------------------------------------------------ --------------
<S> <C>
Smith Barney Inc. ............................................................
J.P. Morgan Securities Inc. ..................................................
Credit Suisse First Boston Corporation........................................
Donaldson, Lufkin & Jenrette
Securities Corporation......................................................
Goldman, Sachs & Co...........................................................
Lehman Brothers Inc...........................................................
Merrill Lynch, Pierce, Fenner &
Smith Incorporated..........................................................
Salomon Brothers Inc..........................................................
--------------
Total..................................................................... 13,200,207
--------------
--------------
</TABLE>
The Underwriters initially propose to offer part of the shares of Class A
Common Stock directly to the public at the public offering price set forth on
the cover page of this Prospectus and part to certain dealers at a price that
represents a concession not in excess of $ per share below the public
offering price. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to the other Underwriters or to
certain other dealers. After the public offering, the public offering price and
such concessions may be changed by the Underwriters. Under the terms and
conditions of the Underwriting Agreement, the Underwriters are committed to take
and pay for all the shares referred to above if any are taken.
The Selling Stockholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
aggregate of 1,000,000 additional shares of Class A Common Stock at the public
offering price set forth on the cover page of this Prospectus less underwriting
discounts and commissions. The Underwriters may exercise such option to purchase
additional shares of Class A Common Stock solely for the purpose of covering
over-allotments, if any, incurred in connection with the sale of the shares of
Class A Common Stock offered hereby. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Class A
Common Stock as the number of shares of Class A Common Stock set forth opposite
such Underwriter's name in the preceding table bears to the total number of
shares in such table.
The Company and the Selling Stockholders have agreed in the Underwriting
Agreement to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act.
28
<PAGE>
The Company, certain executive officers and directors of the Company and
TIGI have agreed, subject to certain limited exceptions, that, for a period of
90 days after the date of this Prospectus or until March 15, 1998, whichever is
later (but in no event later than 120 days after the date of this Prospectus),
they will not, without the prior written consent of Smith Barney and J.P. Morgan
Securities, offer, sell, contract to sell or otherwise dispose of any Common
Stock (or any securities convertible into or exercisable or exchangeable for
Common Stock) or grant any options or warrants to purchase Common Stock.
The Selling Stockholders have agreed with the Underwriters, subject to
certain limited exceptions, not to sell or otherwise dispose of any shares of
Common Stock (except for the shares offered hereby), without the prior written
consent of Smith Barney and J.P. Morgan Securities, for a period of 90 days
after the date of this Prospectus or until March 15, 1998, whichever is later
(but in no event later than 120 days after the date of this Prospectus).
In connection with the offering contemplated hereby and in compliance with
applicable law, the Underwriters may over-allot (i.e., sell more Class A Common
Stock than the total amount shown on the list of Underwriters and participations
which appear above) and may effect transactions which stabilize, maintain or
otherwise affect the market price of the Class A Common Stock at levels above
those which might otherwise prevail in the open market. Such transactions may
include placing bids for the Class A Common Stock or effecting purchases of the
Class A Common Stock for the purpose of pegging, fixing or maintaining the price
of the Class A Common Stock or for the purpose of reducing a syndicate short
position created in connection with the offering. A syndicate short position may
be covered by exercise of the option described above in lieu of or in addition
to open market purchases. In addition, the contractual arrangements among the
Underwriters include a provision whereby, if the Representatives purchase Class
A Common Stock in the open market for the account of the underwriting syndicate
and the securities purchased can be traced to a particular Underwriter or member
of the selling group, the underwriting syndicate may require the Underwriter or
selling group member in question to purchase the Class A Common Stock in
question at the cost price to the syndicate or may recover from (or decline to
pay to) the Underwriter or selling group member in question the selling
concession applicable to the securities in question. The Underwriters are not
required to engage in any of these activities and any such activities, if
commenced, may be discontinued at any time.
Smith Barney, a member of the National Association of Securities Dealers,
Inc. (the "NASD") and an affiliate of the Company, will participate in the
distribution of the Class A Common Stock offered hereby. Accordingly, the
offering will conform with the requirements of Rule 2720 of the Conduct Rules of
the NASD regarding a NASD member firm's underwriting of securities of an
affiliate.
Rule 312 of the NYSE effectively prohibits Smith Barney and its affiliates
from effecting any transaction (except on an unsolicited basis) for the account
of any customer in, or making any recommendation with respect to, the Class A
Common Stock.
Certain of the Underwriters and their affiliates have in the past provided,
and may in the future provide, investment and/or commercial banking services to
Travelers Group and certain of its subsidiaries, including the Company, in the
ordinary course of business.
James Dimon, a director of the Company, is Chairman of the Board, Chief
Executive Officer and a member of the executive committee of Smith Barney and is
also a director, Chief Executive Officer and Chairman of the Board of Smith
Barney Holdings Inc., the immediate parent company of Smith Barney.
Roberto G. Mendoza, a director of the Company, is a director of J.P. Morgan
& Co. Incorporated, the parent of J.P. Morgan Capital and Sixty Wall Street, two
of the Selling Stockholders, and J.P. Morgan Securities Inc. See "Selling
Stockholders."
Travelers Group, the owner of approximately 83.4% of the Company's
outstanding shares of Common Stock, has entered into a definitive merger
agreement with Salomon Inc, the parent of Salomon Brothers Inc, pursuant to
which Salomon Inc and its subsidiaries will become wholly owned subsidiaries of
Travelers Group. The merger agreement is subject to various regulatory approvals
and to approval of the stockholders of Salomon Inc.
29
<PAGE>
LEGAL MATTERS
The validity of the Class A Common Stock offered hereby will be passed upon
for the Company by James M. Michener, Esq., General Counsel of the Company, and
for the Underwriters by Dewey Ballantine LLP, 1301 Avenue of the Americas, New
York, New York. Mr. Michener, Senior Vice President, General Counsel and
Secretary of the Company, beneficially owns, or has rights to acquire under the
Company's employee benefit plans, an aggregate of less than 1% of the Common
Stock. Dewey Ballantine LLP has from time to time acted as counsel for Travelers
Group and certain of its subsidiaries and may do so in the future.
EXPERTS
The consolidated financial statements and financial statement schedules of
Travelers Property Casualty Corp. and its subsidiaries as of December 31, 1996
and 1995, and for each of the years in the three-year period ended December 31,
1996, included or incorporated by reference in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, as amended, have been
incorporated by reference herein, in reliance upon the reports (also
incorporated by reference herein) of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
The combined financial statements of Travelers Casualty and Surety Company
(formerly The Aetna Casualty and Surety Company) and The Standard Fire Insurance
Company and their subsidiaries as of December 31, 1995 and 1994, and for each of
the years in the three-year period ended December 31, 1995, incorporated by
reference in the Company's Annual Report on Form 10-K, as amended, for the year
ended December 31, 1996, have been incorporated by reference herein, in reliance
upon the reports (also incorporated by reference herein) of KPMG Peat Marwick
LLP, independent certified public accountants, and upon the authority of said
firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, DC 20549,
and at the Commission's regional offices at Seven World Trade Center, New York,
New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, DC 20549 at prescribed rates. The Commission also maintains a site
on the World Wide Web, the address of which is http://www.sec.gov, that contains
reports, proxy and information statements and other information regarding
issuers, such as the Company, that file electronically with the Commission. The
Class A Common Stock is listed on the NYSE and such reports, proxy statements
and other information may also be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
--------------
This Prospectus constitutes a part of the Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed with the Commission under the Securities Act with respect to
the securities offered hereby. This Prospectus does not contain all of the
information set forth in such Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Reference is made to such Registration Statement for further information with
respect to the Company and the securities offered hereby. Any statement
contained herein concerning the provisions of any document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission or
incorporated by reference herein are not necessarily complete, and
30
<PAGE>
in each instance reference is made to the copy of such document so filed for a
more complete description of the matter involved. Each such statement is
qualified in its entirety by such reference.
--------------
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company incorporates by reference the following documents heretofore
filed with the Commission pursuant to the Exchange Act:
1. Annual Report on Form 10-K of the Company, as amended, for the
fiscal year ended December 31, 1996.
2. Quarterly Reports on Form 10-Q of the Company for the quarterly
periods ended March 31, 1997 and June 30, 1997.
3. Current Reports on Form 8-K of the Company dated January 21, 1997,
February 10, 1997, April 17, 1997, July 15, 1997 and October 13, 1997.
4. The description of the Class A Common Stock contained in the
Company's Registration Statement on Form 8-A, dated April 22, 1996 (File No.
1-14328), including any amendment or reports filed for the purpose of
updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d)of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the securities offered hereby shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom this Prospectus is delivered, upon written or oral request of such person,
a copy of any and all of the documents referred to above which have been or may
be incorporated by reference herein, other than exhibits thereto (unless such
exhibits are specifically incorporated by reference in such documents). Requests
for such documents should be directed to Corporate Communications, Travelers
Property Casualty Corp., One Tower Square, Hartford, Connecticut 06183;
telephone number: (860) 277-0111. Unless otherwise indicated, the Company's
financial information set forth in this Prospectus is based on generally
accepted accounting principles ("GAAP").
31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY OTHER REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company............................................................... 3
Risk Factors.............................................................. 4
Use of Proceeds........................................................... 11
Price Range of Common Stock and Dividends................................. 12
Recent Operating Results and Developments................................. 12
Selected Financial Information............................................ 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 15
Selling Stockholders...................................................... 25
Principal Stockholder..................................................... 27
Description of Capital Stock.............................................. 27
Underwriting.............................................................. 28
Legal Matters............................................................. 30
Experts................................................................... 30
Available Information..................................................... 30
Incorporation of Certain Information by Reference......................... 31
</TABLE>
13,200,207 SHARES
[LOGO]
CLASS A COMMON STOCK
---------
P R O S P E C T U S
, 1997
---------
SMITH BARNEY INC.
J.P. MORGAN & CO.
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth estimated expenses to be incurred in
connection with the distribution of the securities being registered hereby, all
of which shall be borne by the Company:
<TABLE>
<S> <C>
Commission Registration Fees...................................... $ 155,471
NASD Registration Fee............................................. 30,500
Printing and Engraving Expenses................................... *
Legal Fees and Expenses........................................... *
Accounting Fees and Expenses...................................... 50,000
Blue Sky Fees and Expenses........................................ 10,000
Miscellaneous..................................................... *
---------
Total....................................................... $ *
---------
---------
</TABLE>
Except for the Commission and NASD registration fees, all of the foregoing
are estimates.
- ------------------------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the Delaware General Corporation Law
("DGCL") empowers a corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section
145, or in defense of any claim, issue or matter therein, he shall be
II-1
<PAGE>
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; that indemnification provided for by Section
145 shall, unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of such person's heirs, executors and administrators; and
empowers the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145. Section 3 of Article V of the
Company's Restated By-Laws provides that the Company shall indemnify its
directors and officers to the fullest extent permitted by the DGCL.
Travelers Group Inc. also provides liability insurance for its directors and
officers and the directors and officers of its subsidiaries, including the
Company, which provides for coverage against loss from claims made against
directors and officers in their capacity as such, including liabilities under
the Securities Act of 1933, as amended.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided that such provision shall not eliminate
or limit the liability of a director (i) for any breach of the director'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 DGCL, or (iv) for any transaction from
which the director derived an improper personal benefit. Article TWELFTH of the
Company's Restated Certificate of Incorporation limits the liability of
directors to the fullest extent permitted by Section 102(b)(7).
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.01 Form of Underwriting Agreement.*
5.01 Opinion of James M. Michener, Esq., General Counsel of the Company, with respect to the legality of the
securities being registered.
23.01 Consent of James M. Michener, Esq. (included in Exhibit 5.01).
23.02 Consent of KPMG Peat Marwick LLP.
23.03 Consent of KPMG Peat Marwick LLP.
24.01 Powers of Attorney of certain directors of the Company.
</TABLE>
- ------------------------
* To be filed by amendment.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Travelers Property Casualty Corp. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hartford, State of
Connecticut, this 24th day of October, 1997.
<TABLE>
<S> <C> <C>
TRAVELERS PROPERTY CASUALTY CORP.
By: /s/ ROBERT I. LIPP
-----------------------------------------
Robert I. Lipp
Chairman of the Board, President and
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated on this 24th day of October, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ------------------------------------------------------
<C> <S>
/s/ ROBERT I. LIPP
------------------------------------------- Chairman of the Board, President and Chief Executive
Robert I. Lipp Officer (Principal Executive Officer) and Director
/s/ WILLIAM P. HANNON
------------------------------------------- Chief Financial Officer (Principal Financial Officer)
William P. Hannon
/s/ THOMAS P. SHUGRUE
------------------------------------------- Vice President and Chief Accounting Officer (Principal
Thomas P. Shugrue Accounting Officer)
*
------------------------------------------- Director
Kenneth J. Bialkin
*
------------------------------------------- Director
John J. Byrne
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ------------------------------------------------------
<C> <S>
*
------------------------------------------- Director
James Dimon
------------------------------------------- Director
Dudley C. Mecum
*
------------------------------------------- Director
Roberto G. Mendoza
*
------------------------------------------- Director
Frank J. Tasco
*
------------------------------------------- Director
Sanford I. Weill
*
------------------------------------------- Director
Arthur Zankel
</TABLE>
*By: /s/ WILLIAM P. HANNON
-------------------------
William P. Hannon
Attorney-in-fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
1.01 Form of Underwriting Agreement.*
5.01 Opinion of James M. Michener, Esq., General Counsel of the Company, with respect to the legality
of the securities being registered.
23.01 Consent of James M. Michener, Esq. (included in Exhibit 5.01).
23.02 Consent of KPMG Peat Marwick LLP.
23.03 Consent of KPMG Peat Marwick LLP.
24.01 Powers of Attorney of certain directors of the Company.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
Exhibit 5.01
October 24, 1997
Travelers Property Casualty Corp.
One Tower Square
Hartford, Connecticut 06183
Ladies and Gentlemen:
I am Senior Vice President, General Counsel and Secretary of Travelers
Property Casualty Corp., a Delaware corporation (the "Company"). I have acted
as counsel to the Company in connection with the preparation and filing of a
Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended, for the registration of up to 14,200,207
shares of Class A Common Stock, $.01 par value per share, of the Company (the
"Shares") which Aetna Services, Inc., J.P. Morgan Capital Corporation, The
Trident Partnership, L.P., Fund American Enterprises Holdings, Inc. and Sixty
Wall Street Fund, L.P. (collectively, the "Selling Stockholders") propose to
sell pursuant to the Registration Statement.
In connection with the foregoing, I, or attorneys under my
supervision, have examined the minute books and stock records of the Company,
the Restated Certificate of Incorporation and Restated By-Laws of the Company,
the Registration Statement and the resolutions duly adopted by the Board of
Directors of the Company relating to the offering of the Shares. In addition,
I, or attorneys under my supervision, have reviewed such other documents and
instruments and have conferred with various officers and directors of the
Company and have ascertained or verified to my satisfaction such additional
facts as I have deemed necessary or appropriate for the purpose of this opinion.
In such examination, I have assumed the legal capacity of all natural persons,
the genuineness of all signatures, the authenticity of all documents submitted
to me as originals, the conformity to original documents of all documents
submitted to me as certified, photostatic or facsimile copies and the
authenticity of the originals of such latter documents.
Based upon the foregoing, I am of the opinion that the Shares proposed
to be sold by the Selling Stockholders have been duly authorized and validly
issued and are fully paid and nonassessable.
<PAGE>
Travelers Property Casualty Corp.
October 24, 1997
Page 2
My opinion is limited to matters governed by the Federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. I am not admitted to the practice of law in the State of Delaware.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to my name in the Prospectus
constituting a part of such Registration Statement under the heading "Legal
Matters." In giving such consent, I do not thereby admit that I come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/ James M. Michener
James M. Michener
General Counsel
<PAGE>
Exhibit 23.02
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Travelers Property Casualty Corp.:
We consent to the incorporation by reference in the registration statement on
Form S-3 of our report on the consolidated financial statements of the
Travelers Property Casualty Corp. (the "Company") dated January 17, 1997, and
our report on the related financial statement schedules dated January 17,
1997, which are incorporated by reference or included in the 1996 Annual
Report on Form 10-K of the Company, as amended, and which is incorporated
herein by reference.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
October 24, 1997
<PAGE>
Exhibit 23.03
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Aetna Services, Inc. (formerly "Aetna Life and Casualty Company"):
We consent to the incorporation by reference in the registration statement on
Form S-3 of Travelers Property Casualty Corp. (the "Company") of our report
on the combined financial statements of The Aetna Casualty and Surety Company
and The Standard Fire Insurance Company and their subsidiaries dated February
28, 1996, which are incorporated by reference in the 1996 Annual Report on
Form 10-K of the Company, and which is incorporated herein by reference. Our
report refers to a change to the methods of accounting for certain
investments in debt and equity securities, workers' compensation life table
indemnity reserves and retrospectively rated reinsurance contracts in 1993.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
October 24, 1997
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
Registration Statement on Form S-3
Travelers Property Casualty Corp.
Know All Men By These Presents, that the undersigned, a director of
Travelers Property Casualty Corp., a Delaware corporation (the "Company"), does
hereby constitute and appoint Jay S. Fishman, William P. Hannon and James M.
Michener, and each of them severally, to be my true and lawful attorneys-in-fact
and agents, each acting alone with full power of substitution and
re-substitution, to do or cause to be done any and all acts and things and to
execute any and all instruments and documents which said attorneys-in-fact and
agents, or any of them, may deem advisable or necessary to enable the Company to
comply with the Securities Act of 1933, as amended (the "Securities Act"), and
any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, in connection with the registration under the
Securities Act of shares of the Company's Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), to be offered by the Company for
the account of certain stockholders of the Company, including specifically,
but without limiting the generality of the foregoing, power and authority
to sign, in the name and on behalf of the undersigned as a director of
the Company, a Registration Statement on Form S-3 or another appropriate form in
respect of the registration of such Class A Common Stock and any and all
amendments thereto, including post-effective amendments, and any instruments,
contracts, documents or other writings of which the originals or copies thereof
are to be filed as a part of, or in connection with, any such Registration
Statement or amendments, and to file or cause to be filed the same with the
Securities and Exchange Commission, and to effect any and all applications and
other instruments in the name and on behalf of the undersigned which said
attorneys-in-fact and agents, or any of them, deem advisable in order to qualify
or register the Class A Common Stock under the securities laws of any of the
several States; and the undersigned does hereby ratify all that said
attorneys-in-fact or agents, or any of them, shall do or cause to be done by
virtue thereof.
In Witness Whereof, the undersigned has signed these presents this
24th day of October, 1997.
/s/ Kenneth J. Bialkin
----------------------------------
(Signature)
<PAGE>
POWER OF ATTORNEY
Registration Statement on Form S-3
Travelers Property Casualty Corp.
Know All Men By These Presents, that the undersigned, a director of
Travelers Property Casualty Corp., a Delaware corporation (the "Company"), does
hereby constitute and appoint Jay S. Fishman, William P. Hannon and James M.
Michener, and each of them severally, to be my true and lawful attorneys-in-fact
and agents, each acting alone with full power of substitution and
re-substitution, to do or cause to be done any and all acts and things and to
execute any and all instruments and documents which said attorneys-in-fact and
agents, or any of them, may deem advisable or necessary to enable the Company to
comply with the Securities Act of 1933, as amended (the "Securities Act"), and
any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, in connection with the registration under the
Securities Act of shares of the Company's Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), to be offered by the
Company for the account of certain stockholders of the Company, including
specifically, but without limiting the generality of the foregoing, power and
authority to sign, in the name and on behalf of the undersigned as a director of
the Company, a Registration Statement on Form S-3 or another appropriate form in
respect of the registration of such Class A Common Stock and any and all
amendments thereto, including post-effective amendments, and any instruments,
contracts, documents or other writings of which the originals or copies thereof
are to be filed as a part of, or in connection with, any such Registration
Statement or amendments, and to file or cause to be filed the same with the
Securities and Exchange Commission, and to effect any and all applications and
other instruments in the name and on behalf of the undersigned which said
attorneys-in-fact and agents, or any of them, deem advisable in order to qualify
or register the Class A Common Stock under the securities laws of any of the
several States; and the undersigned does hereby ratify all that said
attorneys-in-fact or agents, or any of them, shall do or cause to be done by
virtue thereof.
In Witness Whereof, the undersigned has signed these presents this
24th day of October, 1997.
/s/ John J. Byrne
---------------------------------
(Signature)
<PAGE>
POWER OF ATTORNEY
Registration Statement on Form S-3
Travelers Property Casualty Corp.
Know All Men By These Presents, that the undersigned, a director of
Travelers Property Casualty Corp., a Delaware corporation (the "Company"), does
hereby constitute and appoint Jay S. Fishman, William P. Hannon and James M.
Michener, and each of them severally, to be my true and lawful attorneys-in-fact
and agents, each acting alone with full power of substitution and
re-substitution, to do or cause to be done any and all acts and things and to
execute any and all instruments and documents which said attorneys-in-fact and
agents, or any of them, may deem advisable or necessary to enable the Company to
comply with the Securities Act of 1933, as amended (the "Securities Act"), and
any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, in connection with the registration under the
Securities Act of shares of the Company's Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), to be offered by the
Company for the account of certain stockholders of the Company, including
specifically, but without limiting the generality of the foregoing, power and
authority to sign, in the name and on behalf of the undersigned as a director of
the Company, a Registration Statement on Form S-3 or another appropriate form in
respect of the registration of such Class A Common Stock and any and all
amendments thereto, including post-effective amendments, and any instruments,
contracts, documents or other writings of which the originals or copies thereof
are to be filed as a part of, or in connection with, any such Registration
Statement or amendments, and to file or cause to be filed the same with the
Securities and Exchange Commission, and to effect any and all applications and
other instruments in the name and on behalf of the undersigned which said
attorneys-in-fact and agents, or any of them, deem advisable in order to qualify
or register the Class A Common Stock under the securities laws of any of the
several States; and the undersigned does hereby ratify all that said
attorneys-in-fact or agents, or any of them, shall do or cause to be done by
virtue thereof.
In Witness Whereof, the undersigned has signed these presents this
24th day of October, 1997.
/s/ James Dimon
--------------------------------
(Signature)
<PAGE>
POWER OF ATTORNEY
Registration Statement on Form S-3
Travelers Property Casualty Corp.
Know All Men By These Presents, that the undersigned, a director of
Travelers Property Casualty Corp., a Delaware corporation (the "Company"), does
hereby constitute and appoint Jay S. Fishman, William P. Hannon and James M.
Michener, and each of them severally, to be my true and lawful attorneys-in-fact
and agents, each acting alone with full power of substitution and
re-substitution, to do or cause to be done any and all acts and things and to
execute any and all instruments and documents which said attorneys-in-fact and
agents, or any of them, may deem advisable or necessary to enable the Company to
comply with the Securities Act of 1933, as amended (the "Securities Act"), and
any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, in connection with the registration under the
Securities Act of shares of the Company's Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), to be offered by the
Company for the account of certain stockholders of the Company, including
specifically, but without limiting the generality of the foregoing, power and
authority to sign, in the name and on behalf of the undersigned as a director of
the Company, a Registration Statement on Form S-3 or another appropriate form in
respect of the registration of such Class A Common Stock and any and all
amendments thereto, including post-effective amendments, and any instruments,
contracts, documents or other writings of which the originals or copies thereof
are to be filed as a part of, or in connection with, any such Registration
Statement or amendments, and to file or cause to be filed the same with the
Securities and Exchange Commission, and to effect any and all applications and
other instruments in the name and on behalf of the undersigned which said
attorneys-in-fact and agents, or any of them, deem advisable in order to qualify
or register the Class A Common Stock under the securities laws of any of the
several States; and the undersigned does hereby ratify all that said
attorneys-in-fact or agents, or any of them, shall do or cause to be done by
virtue thereof.
In Witness Whereof, the undersigned has signed these presents this
24th day of October, 1997.
/s Roberto G. Mendoza
---------------------------------
(Signature)
<PAGE>
POWER OF ATTORNEY
Registration Statement on Form S-3
Travelers Property Casualty Corp.
Know All Men By These Presents, that the undersigned, a director of
Travelers Property Casualty Corp., a Delaware corporation (the "Company"),
does hereby constitute and appoint Jay S. Fishman, William P. Hannon and
James M. Michener, and each of them severally, to be my true and lawful
attorneys-in-fact and agents, each acting alone with full power of
substitution and re-substitution, to do or cause to be done any and all acts
and things and to execute any and all instruments and documents which said
attorneys-in-fact and agents, or any of them, may deem advisable or necessary
to enable the Company to comply with the Securities Act of 1933, as amended
(the "Securities Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under the Securities Act of shares of the Company's Class A
Common Stock, par value $.01 per share (the "Class A Common Stock"), to be
offered by the Company for the account of certain stockholders of the
Company, including specifically, but without limiting the generality of the
foregoing, power and authority to sign, in the name and on behalf of the
undersigned as a director of the Company, a Registration Statement on Form
S-3 or another appropriate form in respect of the registration of such Class
A Common Stock and any and all amendments thereto, including post-effective
amendments, and any instruments, contracts, documents or other writings of
which the originals or copies thereof are to be filed as a part of, or in
connection with, any such Registration Statement or amendments, and to file
or cause to be filed the same with the Securities and Exchange Commission,
and to effect any and all applications and other instruments in the name and
on behalf of the undersigned which said attorneys-in-fact and agents, or any
of them, deem advisable in order to qualify or register the Class A Common
Stock under the securities laws of any of the several States; and the
undersigned does hereby ratify all that said attorneys-in-fact or agents, or
any of them, shall do or cause to be done by virtue thereof.
In Witness Whereof, the undersigned has signed these presents this
24th day of October, 1997.
/s/ Frank J. Tasco
---------------------------------
(Signature)
<PAGE>
POWER OF ATTORNEY
Registration Statement on Form S-3
Travelers Property Casualty Corp.
Know All Men By These Presents, that the undersigned, a director of
Travelers Property Casualty Corp., a Delaware corporation (the "Company"), does
hereby constitute and appoint Jay S. Fishman, William P. Hannon and James M.
Michener, and each of them severally, to be my true and lawful attorneys-in-fact
and agents, each acting alone with full power of substitution and
re-substitution, to do or cause to be done any and all acts and things and to
execute any and all instruments and documents which said attorneys-in-fact and
agents, or any of them, may deem advisable or necessary to enable the Company to
comply with the Securities Act of 1933, as amended (the "Securities Act"), and
any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, in connection with the registration under the
Securities Act of shares of the Company's Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), to be offered by the
Company for the account of certain stockholders of the Company, including
specifically, but without limiting the generality of the foregoing, power and
authority to sign, in the name and on behalf of the undersigned as a director of
the Company, a Registration Statement on Form S-3 or another appropriate form in
respect of the registration of such Class A Common Stock and any and all
amendments thereto, including post-effective amendments, and any instruments,
contracts, documents or other writings of which the originals or copies thereof
are to be filed as a part of, or in connection with, any such Registration
Statement or amendments, and to file or cause to be filed the same with the
Securities and Exchange Commission, and to effect any and all applications and
other instruments in the name and on behalf of the undersigned which said
attorneys-in-fact and agents, or any of them, deem advisable in order to qualify
or register the Class A Common Stock under the securities laws of any of the
several States; and the undersigned does hereby ratify all that said
attorneys-in-fact or agents, or any of them, shall do or cause to be done by
virtue thereof.
In Witness Whereof, the undersigned has signed these presents this
24th day of October, 1997.
/s/ Sanford I. Weill
---------------------------------
(Signature)
<PAGE>
POWER OF ATTORNEY
Registration Statement on Form S-3
Travelers Property Casualty Corp.
Know All Men By These Presents, that the undersigned, a director of
Travelers Property Casualty Corp., a Delaware corporation (the "Company"), does
hereby constitute and appoint Jay S. Fishman, William P. Hannon and James M.
Michener, and each of them severally, to be my true and lawful attorneys-in-fact
and agents, each acting alone with full power of substitution and
re-substitution, to do or cause to be done any and all acts and things and to
execute any and all instruments and documents which said attorneys-in-fact and
agents, or any of them, may deem advisable or necessary to enable the Company to
comply with the Securities Act of 1933, as amended (the "Securities Act"), and
any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, in connection with the registration under the
Securities Act of shares of the Company's Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), to be offered by the
Company for the account of certain stockholders of the Company, including
specifically, but without limiting the generality of the foregoing, power and
authority to sign, in the name and on behalf of the undersigned as a director of
the Company, a Registration Statement on Form S-3 or another appropriate form in
respect of the registration of such Class A Common Stock and any and all
amendments thereto, including post-effective amendments, and any instruments,
contracts, documents or other writings of which the originals or copies thereof
are to be filed as a part of, or in connection with, any such Registration
Statement or amendments, and to file or cause to be filed the same with the
Securities and Exchange Commission, and to effect any and all applications and
other instruments in the name and on behalf of the undersigned which said
attorneys-in-fact and agents, or any of them, deem advisable in order to qualify
or register the Class A Common Stock under the securities laws of any of the
several States; and the undersigned does hereby ratify all that said
attorneys-in-fact or agents, or any of them, shall do or cause to be done by
virtue thereof.
In Witness Whereof, the undersigned has signed these presents this
24th day of October, 1997.
/s/ Arthur Zankel
---------------------------------
(Signature)
