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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 21, 1997
--------------------------
TRAVELERS/AETNA PROPERTY CASUALTY CORP.
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(Exact name of registrant as specified in its charter)
DELAWARE 1-14328 06-1445591
-------- ------- ----------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 277-0111
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TRAVELERS/AETNA PROPERTY CASUALTY CORP.
CURRENT REPORT ON FORM 8-K
ITEM 5. OTHER EVENTS
Travelers/Aetna Property Casualty Corp. (the "Registrant") is filing this
Current Report on Form 8-K to provide certain additional financial information
of the Registrant for the three months ended March 31, 1996; June 30, 1996;
September 30, 1996 and December 31, 1996 and the year ended December 31, 1996.
2
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[TRAVELERS/AETNA LOGO] 1996 Financial Supplement
Travelers/Aetna Property Casualty Corp. is one of the largest property and
casualty insurance companies in the United States. The Company is engaged in
providing a wide range of commercial and personal property and casualty
insurance products and services to businesses, associations and individuals.
<TABLE>
<CAPTION>
1996 Financial Highlights
1Q 2Q 3Q 4Q
1996 1996 1996 1996 1996
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Core operating income (millions) $80.8 $213.0 $246.1 $261.6 $801.5
Adjustment for net acquisition-related charges (millions) - (391.0) - (31.5) (422.5)
------ ------ ------ ------ ------
Operating income (loss) (millions) $80.8 ($178.0) $246.1 $230.1 $379.0
Net income (loss) (millions) $98.0 ($216.2) $247.0 $261.7 $390.5
Earnings per share:
Core operating income $0.27 $0.56 $0.62 $0.65 $2.17
Adjustment for net acquisition-related charges - (1.05) - (0.08) (1.15)
------ ------ ------ ------ ------
Operating income (loss) $0.27 ($0.49) $0.62 $0.57 $1.02
Net income (loss) $0.33 ($0.59) $0.62 $0.65 $1.05
Total assets, at period end (billions) $24.7 $50.4 $49.6 N/A N/A
Total equity, at period end (billions) $3.5 $5.8 $6.0 $6.5 $6.5
Book value per share, at period end $11.97 $14.40 $15.12 $16.22 $16.22
Average shares used for EPS (millions) 294.5 374.2 400.0 399.8 367.1
Common shares outstanding
at period end (millions) NM 400.0 399.9 399.6 399.6
</TABLE>
N/A - Not available
NM - Not meaningful
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RECENT ORGANIZATIONAL CHANGES
On April 23, 1996, Travelers completed the previously announced launch
of Travelers/Aetna Property Casualty Corp., the new company formed from
the combination of Travelers Indemnity and the domestic property and
casualty business it acquired from Aetna Life and Casualty Company. The
purchase price was approximately $4 billion in cash. Travelers/Aetna
Property Casualty Corp. is 82% owned by Travelers Group, 10% publicly
owned, and 8% owned by several private investors, including J.P.
Morgan, Trident Partnership, L.P. and Fund American Enterprise
Holdings.
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This report is for information purposes only. It should be read in
conjunction with documents filed by Travelers/Aetna Property Casualty
Corp. with the Securities and Exchange Commission, including the
registration statement on Form S-1 filed on April 22, 1996 and the most
recent Quarterly Reports on Form 10-Q.
3
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AFTER-TAX INCOME BY SOURCE Travelers/Aetna Property Casualty Corp.
(in millions, except per share data)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1Q 2Q 3Q 4Q
1996 1996 1996 1996 1996
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<S> <C> <C> <C> <C> <C>
Property Casualty Operations:
Underwriting:
Commercial Lines $(59.3) $(476.5) $(87.7) $(172.7) $ (796.2)
Personal Lines (9.4) (11.0) (1.3) 67.2 45.5
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Total GAAP underwriting loss $(68.7) $(487.5) $(89.0) $(105.5) $ (750.7)
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Other income $ 5.3 $ 11.5 $ 20.7 $ 20.0 $ 57.5
Net investment income $145.1 $ 328.0 $342.6 $ 344.6 $1,160.3
Effective tax rate on net investment income 25.8% 30.4% 30.5% 30.2% 29.8%
Operating income (loss) from Property Casualty Operations $ 81.7 $(148.0) $274.3 $ 259.1 $ 467.1
Operating loss from corporate & other (0.9) (30.0) (28.2) (29.0) (88.1)
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Total operating income (loss)* 80.8 (178.0) 246.1 230.1 379.0
Realized gains (losses) 17.2 (38.2) 0.9 31.6 11.5
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Net income (loss) 98.0 (216.2) 247.0 261.7 390.5
Preferred dividends - (3.5) - - (3.5)
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Net income (loss) applicable to common stock $ 98.0 $(219.7) $247.0 $ 261.7 $ 387.0
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*Core operating income, before net acquisition-related
charges of $391.0 million in 2Q and $31.5 million in 4Q $ 80.8 $ 213.0 $246.1 $ 261.6 $ 801.5
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Per common share:
Core operating income $ 0.27 $ 0.56 $ 0.62 $ 0.65 $ 2.17
Net acquisition-related charges - (1.05) - (0.08) (1.15)
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Operating income (loss) 0.27 (0.49) 0.62 0.57 1.02
Realized gains (losses) 0.06 (0.10) - 0.08 0.03
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Net income (loss) $ 0.33 $ (0.59) $ 0.62 $ 0.65 $ 1.05
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Dividends declared $ - $ - $ 30.0 $ 30.0 $ 60.0
Weighted average common and equivalent shares outstanding 294.5 374.2 400.0 399.8 367.1
Common shares outstanding at period end N/A 400.0 399.9 399.6 399.6
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</TABLE>
Note: Financial data for The Aetna Casualty and Surety Company and The Standard
Fire Insurance Company (Aetna P&C) is included from the date of
acquisition (April 2, 1996).
4
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================================================================================
CONSOLIDATED STATEMENT OF OPERATIONS Travelers/Aetna Property Casualty Corp.
(in millions)
<TABLE>
<CAPTION>
1Q 2Q 3Q 4Q
1996 1996 1996 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Premiums $ 826.2 $1,666.6 $1,817.7 $1,717.5 $6,028.0
Net investment income 195.7 471.8 493.8 494.5 1,655.8
Fee income 100.2 117.8 119.9 117.2 455.1
Realized investment gains (losses) 26.2 (58.6) 1.4 48.9 17.9
Other revenues 3.6 4.6 18.7 13.7 40.6
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Total revenues 1,151.9 2,202.2 2,451.5 2,391.8 8,197.4
- ---------------------------------------------------------------------------------------------------------------------------
Claims and expenses:
Claims and claim adjustment expenses* 730.3 1,806.9 1,442.1 1,303.2 5,282.5
Amortization of deferred acquisition costs 123.1 246.9 278.5 257.2 905.7
Interest expense - 38.0 39.9 40.1 118.0
General and administrative expenses 173.8 470.9 338.5 420.9 1,404.1
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 1,027.2 2,562.7 2,099.0 2,021.4 7,710.3
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) before federal income taxes 124.7 (360.5) 352.5 370.4 487.1
Federal income taxes (benefit) 26.7 (144.3) 105.5 108.7 96.6
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Net income (loss) $ 98.0 $ (216.2) $ 247.0 $ 261.7 $ 390.5
- ---------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 80.8 $ (178.0) $ 246.1 $ 230.1 $ 379.0
Core operating income,
before net acquisition-related charges $ 80.8 $ 213.0 $ 246.1 $ 261.6 $ 801.5
*Includes pre-tax:
Catastrophe losses (1) $ 36.9 $ 22.2 $ 54.9 $ 23.1 $ 137.1
Asbestos and environmental losses $ 28.0 $ 73.0 $ 25.0 $ 21.0 $ 147.0
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
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(1) Net of reinsurance.
Note: Financial data for The Aetna Casualty and Surety Company and The Standard
Fire Insurance Company (Aetna P&C) is included from the date of
acquisition (April 2, 1996).
5
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================================================================================
SELECTED STATISTICS Travelers/Aetna Property Casualty Corp.
PROPERTY CASUALTY OPERATIONS (1)
(in millions)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1Q 2Q 3Q 4Q
1996 1996 1996 1996 1996
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GAAP CONSOLIDATED STATEMENT OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Revenues:
Premiums $ 822.7 $1,660.1 $1,817.3 $1,717.5 $6,017.6
Net investment income 195.1 471.2 493.2 494.0 1,653.5
Fee income (2) 100.2 117.8 119.9 117.2 455.1
Realized capital gains (losses) 26.2 (58.2) 1.4 48.9 18.3
Other revenues 3.0 4.1 17.6 12.7 37.4
- ---------------------------------------------------------------------------------------------------------------------------
Total revenues 1,147.2 2,195.0 2,449.4 2,390.3 8,181.9
- ---------------------------------------------------------------------------------------------------------------------------
Claims and expenses:
Claims and claim adjustment expenses:
Claims and claim adjustment expenses 726.7 1,794.4 1,430.6 1,289.0 5,240.7
Policyholder dividends 1.8 10.4 10.9 14.8 37.9
Amortization of deferred acquisition costs 123.1 246.9 278.5 257.2 905.7
General and administrative expenses 169.5 457.5 333.9 414.5 1,375.4
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 1,021.1 2,509.2 2,053.9 1,975.5 7,559.7
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) before federal income taxes 126.1 (314.2) 395.5 414.8 622.2
Federal income taxes (benefit) 27.2 (128.3) 120.3 124.2 143.4
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Net income (loss) from Property Casualty Operations* $ 98.9 $ (185.9) $ 275.2 $ 290.6 $ 478.8
- ---------------------------------------------------------------------------------------------------------------------------
*Includes investment results, net of taxes:
Net investment income $ 145.1 $ 328.0 $ 342.6 $ 344.6 $1,160.3
Realized capital gains (losses) $ 17.2 $ (37.9) $ 0.9 $ 31.5 $ 11.7
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
(1) Excluding corporate & other.
(2) Includes fees applicable to GAAP underwriting results of $94.5, $105.9,
$107.6, $104.0 and $412.0 million for 1Q, 2Q, 3Q, 4Q and YTD 1996,
respectively.
Note: Except where otherwise noted, financial data for The Aetna Casualty and
Surety Company and The Standard Fire Insurance Company (Aetna P&C) is
included from the date of acquisition (April 2, 1996).
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================================================================================
COMBINED RATIOS Travelers/Aetna Property Casualty Corp.
(BEFORE POLICYHOLDER DIVIDENDS)
PROPERTY CASUALTY OPERATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1Q 2Q 3Q 4Q
1996 1996 1996 1996 1996
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GAAP COMBINED RATIO:
<S> <C> <C> <C> <C> <C>
Loss and loss adjustment expense ratio 79.3% 101.9% 73.8% 70.3% 81.0%
Other underwriting expense ratio 27.3% 37.3% 30.4% 35.0% 33.6%
- -------------------------------------------------------------------------------------------------------------------------------
Combined ratio 106.6% 139.2% 104.2% 105.3% 114.6%
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Core combined ratio, before net acquisition-related charges:
Loss and loss adjustment expense ratio 79.3% 75.8% 73.8% 70.5% 73.9%
Other underwriting expense ratio 27.3% 31.4% 30.4% 33.4% 31.6%
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Combined ratio excluding net acquisition-related charges 106.6% 107.2% 104.2% 103.9% 105.5%
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STATUTORY COMBINED RATIO:
Loss and loss adjustment expense ratio 82.9% 108.7% 75.7% 74.6% 85.5%
Other underwriting expense ratio 27.0% 34.3% 31.0% 31.0% 31.3%
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Combined ratio 109.9% 143.0% 106.7% 105.6% 116.8%
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Core combined ratio, before net acquisition-related charges:
Loss and loss adjustment expense ratio 82.9% 76.5% 75.7% 72.7% 76.1%
Other underwriting expense ratio 27.0% 30.7% 31.0% 30.5% 30.2%
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Combined ratio excluding net acquisition-related charges 109.9% 107.2% 106.7% 103.2% 106.3%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Financial data for The Aetna Casualty and Surety Company and The Standard
Fire Insurance Company (Aetna P&C) is included from the date of
acquisition (April 2, 1996).
7
<PAGE> 8
================================================================================
ANALYSIS OF STATUTORY RESERVES FOR Travelers/Aetna Property Casualty Corp.
LOSSES AND LOSS ADJUSTMENT EXPENSES
PROPERTY CASUALTY OPERATIONS
(in millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1Q 2Q 3Q 4Q
1996 1996 1996 1996 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net earned premiums $ 822.7 $ 1,660.3 $ 1,816.5 $ 1,701.5 $ 6,001.0
Incurred losses and loss adjustment expenses $ 682.0 $ 1,804.2 $ 1,375.6 $ 1,270.1 $ 5,131.9
Reserves for losses and loss adjustment expenses (1) $10,121.1 $22,186.6 $22,079.8 $ 21,811.9 $21,811.9
Reserves/Net earned premiums (2) 3.10:1 3.11:1 3.12:1 3.10:1 3.10:1
Reserves/surplus 3.95:1 4.20:1 4.10:1 4.02:1 4.02:1
Increase (decrease) in reserves (3) $ 40.8 $ 395.2 $ (106.8) $ (267.9) $ 61.3
Increase (decrease) in reserves/Net earned premiums (2) 0.01:1 0.06:1 (0.02):1 (0.04):1 0.01:1
Claims paid $ 641.2 $ 1,409.0 $ 1,482.4 $ 1,538.0 $ 5,070.6
Claims paid/incurred losses and loss adjustment expenses 0.94:1 0.78:1 1.08:1 1.21:1 0.99:1
Claims paid/Net earned premiums 0.78:1 0.85:1 0.82:1 0.90:1 0.84:1
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
(1) The 2Q 1996 reserves for losses and loss adjustment expenses include
$11,670.3 million of reserves for Aetna P&C business acquired.
(2) Based on 12 month rolling pro forma net earned premiums, which include
Aetna P&C for all periods.
(3) The 2Q, 4Q and YTD 1996 increases in statutory reserves include $466.4,
$53.4 and $519.8 million of net acquisition-related charges, respectively.
Note: Except where otherwise noted, financial data for The Aetna Casualty
and Surety Company and The Standard Fire Insurance Company (Aetna P&C) is
included from the date of acquisition (April 2, 1996).
8
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SELECTED STATISTICS Travelers/Aetna Property Casualty Corp.
COMMERCIAL LINES
(in millions)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1Q 2Q 3Q 4Q
1996 1996 1996 1996 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GAAP operating income (loss)(1) $ 59.0 $ (204.4) $ 203.4 $ 122.0 $ 180.0
Net written premiums by market:(2)
National accounts $ 173.4 $ 90.6 $ 240.6 $ 186.8 $ 691.4
Commercial accounts 201.6 380.5 450.6 452.6 1,485.3
Select 140.9 368.6 345.3 336.3 1,191.1
Specialty 102.4 171.7 180.0 151.6 605.7
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Total net written premiums $ 618.3 $1,011.4 $1,216.5 $1,127.3 $3,973.5
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Premium equivalents(3) $ 763.4 $ 752.2 $ 470.2 $ 609.9 $2,595.7
Net earned premiums $ 496.6 $1,005.3 $1,150.6 $1,025.3 $3,677.8
Fee income $ 93.8 $ 102.7 $ 102.9 $ 99.4 $ 398.8
Net investment income (pre-tax) $ 155.5 $ 383.2 $ 398.1 $ 405.7 $1,342.5
Effective tax rate on net investment income 25.4% 30.3% 30.4% 30.2% 29.7%
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Statutory combined ratio:*(4)
Loss and loss adjustment expense ratio 86.9% 133.2% 76.8% 86.1% 96.2%
Other underwriting expense ratio 26.1% 37.9% 32.2% 32.2% 32.7%
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Combined ratio 113.0% 171.1% 109.0% 118.3% 128.9%
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*Core statutory combined ratio, excluding
net acquisition-related charges:(4)
Loss and loss adjustment expense ratio 86.9% 79.8% 76.8% 76.8% 79.1%
Other underwriting expense ratio 26.1% 31.7% 32.2% 31.3% 30.9%
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Combined ratio excluding net acquisition-related charges 113.0% 111.5% 109.0% 108.1% 110.0%
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Catastrophe losses (after-tax)(5) $ 6.0 $ 0.4 $ 16.2 $ 8.4 $ 31.0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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(1) Includes after-tax charges of $382.7 million in 2Q, $31.5 million in 4Q
and $414.2 million YTD related to the acquisition of Aetna P&C. In relation
to the acquisition of Aetna P&C, the Company reviewed Aetna's insurance
reserves and allocated an additional $60.0 million ($39.0 million
after-tax) in 4Q of reserves from Personal Lines to Commercial
Lines. Prior to the acquisition, Aetna did not report Personal Lines and
Commercial Lines segment results.
(2) The 2Q and YTD 1996 premiums include a one-time adjustment associated
with a reinsurance transaction, which reduced premiums by $89 million.
(3) Equivalents represent estimates of additional premiums that customers
would have been charged under a fully insured arrangement and do not equal
actual revenues.
(4) Before policyholder dividends, which are immaterial.
(5) Net of reinsurance.
Note: Financial data for The Aetna Casualty and Surety Company and The Standard
Fire Insurance Company (Aetna P&C) is included from the date of
acquisition (April 2, 1996).
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================================================================================
SELECTED STATISTICS Travelers/Aetna Property Casualty Corp.
PERSONAL LINES
(in millions)
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<TABLE>
<CAPTION>
1Q 2Q 3Q 4Q
1996 1996 1996 1996 1996
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<S> <C> <C> <C> <C> <C>
GAAP operating income (1) $ 22.7 $ 56.4 $ 70.9 $ 137.1 $ 287.1
Net written premiums by market:
Auto $ 276.9 $ 459.7 $ 456.1 $ 452.3 $1,645.0
Homeowners and other 64.3 216.1 211.6 221.8 713.8
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Total net written premiums $ 341.2 $ 675.8 $ 667.7 $ 674.1 $2,358.8
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Net earned premiums $ 326.1 $ 655.0 $ 665.9 $ 676.2 $2,323.2
Net investment income (pre-tax) $ 39.6 $ 88.0 $ 95.1 $ 88.3 $ 311.0
Effective tax rate on net investment income 27.3% 30.9% 31.0% 30.6% 30.4%
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Statutory combined ratio:*
Loss and loss adjustment expense ratio 76.9% 71.0% 73.9% 57.2% 68.7%
Other underwriting expense ratio 28.4% 29.1% 28.6% 29.1% 28.9%
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Combined ratio 105.3% 100.1% 102.5% 86.3% 97.6%
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*Core statutory combined ratio, excluding acquisition-
related reserve decrease:
Loss and loss adjustment expense ratio 76.9% 71.0% 73.9% 66.1% 71.2%
Other underwriting expense ratio 28.4% 29.1% 28.6% 29.1% 28.9%
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Combined ratio excluding acquisition-related reserve decrease 105.3% 100.1% 102.5% 95.2% 100.1%
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Catastrophe losses (after-tax) (2) $ 18.0 $ 14.0 $ 19.5 $ 6.6 $ 58.1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
(1) In relation to the acquisition of Aetna P&C, the Company reviewed Aetna's
insurance reserves and allocated an additional $60.0 million ($39.0
million after-tax) in 4Q of reserves from Personal Lines to Commercial
Lines. Prior to the acquisition, Aetna did not report Personal Lines
and Commercial Lines segment results.
(2) Net of reinsurance.
Note: Financial data for The Aetna Casualty and Surety Company and The Standard
Fire Insurance Company (Aetna P&C) is included from the date of
acquisition (April 2, 1996).
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================================================================================
INVESTMENT OPERATIONS Travelers/Aetna Property Casualty Corp.
(In millions)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRE-TAX BOOK
At December 31, 1996 AMOUNT YIELD
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
<S> <C> <C>
Taxable fixed maturities (including redeemable preferred stock) $19,339.1 7.12%
Tax-exempt fixed maturities 5,106.8 5.60
Non-redeemable preferred stocks 603.2 6.29
Common stocks 175.4 0.03
Mortgage loans 1,005.6 11.62
Real estate held for sale 156.7 14.27
Short-term securities 2,311.3 5.48
Other investments (1) 666.2 n/a
- ----------------------------------------------------------------------------------------------------------------------
Total investments $29,364.3 6.85%
- ----------------------------------------------------------------------------------------------------------------------
Unrealized investment gains (net of taxes) $ 284.5
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------
(1) Primarily includes securities partnership interests held for long-term
appreciation. Other investments that generate only intermittent income
are also included in this category and yields fluctuate accordingly.
Note: Financial data for The Aetna Casualty and Surety Company and The Standard
Fire Insurance Company (Aetna P&C) is included from the date of
acquisition (April 2, 1996).
11
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 21, 1997
Travelers/Aetna Property Casualty Corp.
By: /s/ William P. Hannon
------------------------
William P. Hannon
Chief Financial Officer
12
