<PAGE> 1
Registration Statement No. 333-82013
811-09413
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
Pre-Effective Amendment No. 2 to the
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
And
Pre-Effective Amendment No. 2 to the
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
THE TRAVELERS SEPARATE ACCOUNT TEN FOR VARIABLE ANNUITIES
---------------------------------------------------------
(Exact name of Registrant)
THE TRAVELERS LIFE AND ANNUITY COMPANY
--------------------------------------
(Name of Depositor)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
---------------------------------------------
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including area code: (860) 277-0111
ERNEST J. WRIGHT
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
---------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable following
the effectiveness of the
Registration Statement
It is proposed that this filing will become effective (check appropriate box):
N/A immediately upon filing pursuant to paragraph (b) of Rule 485.
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N/A on ___________ pursuant to paragraph (b) of Rule 485.
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N/A 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
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N/A on ___________ pursuant to paragraph (a)(1) of Rule 485.
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If appropriate, check the following box:
_____this post-effective amendment designates a new effective date for a
previously filed post- effective amendment.
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 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE> 2
Pre-Effective Amendment No. 1 to the Registration Statement filed on Form N-4
is hereby incorporated by reference in its entirety.
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
The Travelers Life and Annuity Company:
We have audited the accompanying balance sheets of The Travelers Life and
Annuity Company as of December 31, 1998 and 1997, and the related statements of
income, changes in retained earnings and accumulated other changes in equity
from non-owner sources and cash flows for each of the years in the three-year
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Life and Annuity
Company as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1998, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
January 25, 1999
F-1
<PAGE> 4
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums $ 23,677 $ 35,190 $ 17,462
Net investment income 171,003 168,653 151,326
Realized investment gains (losses) 18,493 44,871 (9,613)
Fee income 14,687 5,004 1,336
Other 14,199 3,159 940
- -------------------------------------------------------------------------- ------------- --------------
Total Revenues 242,059 256,877 161,451
- -------------------------------------------------------------------------- ------------- --------------
BENEFITS AND EXPENSES
Current and future insurance benefits 81,371 95,639 77,285
Interest credited to contractholders 51,535 35,165 35,607
Amortization of deferred acquisition costs and
value in insurance in force 17,031 6,036 3,286
Operating expenses 3,937 10,462 5,691
- -------------------------------------------------------------------------- ------------- --------------
Total Benefits and Expenses 153,874 147,302 121,869
- -------------------------------------------------------------------------- ------------- --------------
Income before federal income taxes 88,185 109,575 39,582
- -------------------------------------------------------------------------- ------------- --------------
Federal income taxes:
Current 18,917 33,859 29,456
Deferred expense (benefit) 11,783 4,344 (15,665)
- -------------------------------------------------------------------------- ------------- --------------
Total Federal Income Taxes 30,700 38,203 13,791
- -------------------------------------------------------------------------- ------------- --------------
Net income $ 57,485 $ 71,372 $ 25,791
========================================================================== ============= ==============
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE> 5
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
- ------------------------------------------------------------------------------------------ ---------------- -----------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value (cost, $1,707,347; $1,571,121) $1,838,681 $1,678,120
Equity securities, at fair value (cost, $25,826; $15,092) 26,685 16,289
Mortgage loans 174,565 160,247
Short-term securities 126,176 169,229
Other invested assets 136,122 121,242
- ------------------------------------------------------------------------------------------ ---------------- -----------------
Total Investments 2,302,229 2,145,127
- ------------------------------------------------------------------------------------------ ---------------- -----------------
Separate accounts 2,178,474 812,059
Deferred acquisition costs and value of insurance in force 194,213 90,966
Premium balances receivable 16,074 9,288
Deferred federal income taxes 12,395 33,661
Other assets 41,119 61,904
- ------------------------------------------------------------------------------------------ ---------------- -----------------
Total Assets $4,744,504 $3,153,005
- ------------------------------------------------------------------------------------------ ---------------- -----------------
LIABILITIES
Future policy benefits $963,171 $971,602
Contractholder funds 947,411 818,971
Separate accounts 2,178,474 812,059
Other liabilities 114,690 84,712
- ------------------------------------------------------------------------------------------ ---------------- -----------------
Total Liabilities 4,203,746 2,687,344
- ------------------------------------------------------------------------------------------ ---------------- -----------------
SHAREHOLDER'S EQUITY
Common stock, par value $100; 100,000 shares authorized, 30,000 issued and outstanding 3,000 3,000
Additional paid-in capital 167,314 167,314
Retained earnings 282,555 225,070
Accumulated other changes in equity from non-owner sources 87,889 70,277
- ------------------------------------------------------------------------------------------ ---------------- -----------------
Total Shareholder's Equity 540,758 465,661
- ------------------------------------------------------------------------------------------ ---------------- -----------------
Total Liabilities and Shareholder's Equity $4,744,504 $3,153,005
========================================================================================== ================ =================
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 6
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CHANGES IN RETAINED EARNINGS AND ACCUMULATED
OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------ ---------------- ----------------- -------------------
STATEMENTS OF CHANGES IN RETAINED EARNINGS 1998 1997 1996
- ------------------------------------------------------ ---------------- ----------------- -------------------
<S> <C> <C> <C>
Balance, beginning of year $225,070 $167,698 $157,907
Net income 57,485 71,372 25,791
Dividends to parent - 14,000 16,000
- ------------------------------------------------------ ---------------- ----------------- -------------------
Balance, end of year $282,555 $225,070 $167,698
====================================================== ================ ================= ===================
- ------------------------------------------------------ ---------------- ----------------- -------------------
STATEMENTS OF ACCUMULATED OTHER CHANGES
IN EQUITY FROM NON-OWNER SOURCES
- ------------------------------------------------------ ---------------- ----------------- -------------------
Balance, beginning of year $70,277 $33,856 $35,330
Unrealized gains (losses), net of tax 17,612 36,421 (1,474)
- ------------------------------------------------------ ---------------- ----------------- -------------------
Balance, end of year $87,889 $70,277 $33,856
====================================================== ================ ================= ===================
- ------------------------------------------------------ ---------------- ----------------- -------------------
SUMMARY OF CHANGES IN EQUITY
FROM NON-OWNER SOURCES
- ------------------------------------------------------ ---------------- ----------------- -------------------
Net Income $57,485 $71,372 $25,791
Other changes in equity from
non-owner sources 17,612 36,421 (1,474)
- ------------------------------------------------------ ---------------- ----------------- -------------------
Total changes in equity from
non-owner sources $75,097 $107,793 $24,317
====================================================== ================ ================= ===================
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 7
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
($ in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
- ----------------------------------------------------------------------------------- --------------- --------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $ 22,300 $ 34,553 $ 6,472
Net investment income received 146,158 170,460 71,083
Benefits and claims paid (90,872) (90,820) (70,331)
Interest credited to contractholders (51,535) (35,165) (813)
Operating expenses paid (75,632) (40,868) (5,482)
Income taxes paid (25,214) (22,440) (23,931)
Other (596) (7,702) (6,857)
- ----------------------------------------------------------------------------------- --------------- --------------- -------------
Net Cash Provided by (Used in) Operating Activities (75,391) 8,018 (29,859)
- ----------------------------------------------------------------------------------- --------------- --------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 113,456 81,899 20,301
Mortgage loans 25,462 8,972 37,789
Proceeds from sales of investments
Fixed maturities 1,095,976 856,846 978,970
Equity securities 6,020 12,404 12,818
Mortgage loans - 5,483 22,437
Real estate held for sale - 4,493 -
Purchases of investments
Fixed maturities (1,320,704) (1,020,803) (994,443)
Equity securities (13,653) (6,382) (5,412)
Mortgage loans (39,158) (41,967) (21,450)
Policy loans (2,010) (1,144) (1,750)
Short-term securities, (purchases) sales, net 43,054 (88,067) (19,688)
Other investments, (purchases) sales, net 1,110 (51,502) (6,160)
Securities transactions in course of settlement 36,459 10,526 (51,703)
- ----------------------------------------------------------------------------------- --------------- --------------- -------------
Net Cash Used in Investing Activities (53,988) (229,242) (28,291)
- ----------------------------------------------------------------------------------- --------------- --------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 211,476 325,932 96,490
Contractholder fund withdrawals (83,036) (89,145) (22,340)
Dividends to parent company - (14,000) (16,000)
- ----------------------------------------------------------------------------------- --------------- --------------- -------------
Net Cash Provided by Financing Activities 128,440 222,787 58,150
- ----------------------------------------------------------------------------------- --------------- --------------- -------------
Net increase (decrease) in cash (939) 1,563 -
- ----------------------------------------------------------------------------------- --------------- --------------- -------------
Cash at December 31, $624 $1,563 $ -
=================================================================================== =============== =============== =============
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 8
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the accompanying
financial statements follow.
Basis of Presentation
The Travelers Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), an indirect wholly
owned subsidiary of Citigroup Inc. (Citigroup), formerly Travelers Group
Inc. The financial statements and accompanying footnotes of the Company are
prepared in conformity with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and benefits and expenses
during the reporting period. Actual results could differ from those
estimates.
The Company offers a variety of variable annuity products where the
investment risk is borne by the contractholder, not the Company, and the
benefits are not guaranteed. The premiums and deposits related to these
products are reported in separate accounts. The Company considers it
necessary to differentiate, for financial statement purposes, the results
of the risks it has assumed from those it has not. See also Note 6.
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
ACCOUNTING CHANGES
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (FAS 125). This
statement establishes accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. These
standards are based on an approach that focuses on control. Under this
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered
and derecognizes liabilities when extinguished. FAS 125 provides standards
for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. Effective January 1, 1998, the
Company adopted the collateral provisions of FAS 125 which were not
effective until 1998 in accordance with Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
SFAS 125". The adoption of the collateral provisions of FAS 125 created
additional assets and liabilities on the Company's statement of financial
position related to the recognition of securities provided and received as
collateral. There was no impact on the results of operations from the
adoption of the collateral provisions of FAS 125.
F-6
<PAGE> 9
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Reporting Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (FAS 130).
FAS 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. All items that are required to be recognized under
accounting standards as components of comprehensive income are required to
be reported in an annual financial statement that is displayed with the
same prominence as other financial statements. This statement stipulates
that comprehensive income reflect the change in equity of an enterprise
during a period from transactions and other events and circumstances from
non-owner sources. Comprehensive income thus represents the sum of net
income and other changes in equity from non-owner sources. The accumulated
balance of other changes in equity from non-owner sources is required to be
displayed separately from retained earnings and additional paid-in capital
in the balance sheet. The adoption of FAS 130 resulted in the Company
reporting unrealized gains and losses on investments in debt and equity
securities in changes in equity from non-owner sources. See Note 3.
Disclosures About Segments of an Enterprise and Related Information
During 1998, Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information" (FAS
131) became effective. FAS 131 establishes standards for the way that
public enterprises report information about operating segments in annual
financial statements and requires that selected information about those
operating segments be reported in interim financial statements. This
statement supersedes Statement of Financial Accounting Standards No. 14,
"Financial Reporting for Segments of a Business Enterprise". FAS 131
requires that all public enterprises report financial and descriptive
information about its reportable operating segments. Operating segments are
defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decisionmaker in deciding how to allocate resources and in assessing
performance. The Company only has one reportable operating segment and
therefore, no additional disclosures are required under FAS 131.
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use
During the third quarter of 1998, the Company adopted (effective January 1,
1998) the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants' Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" (SOP 98-1). SOP 98-1 provides guidance on accounting for the
costs of computer software developed or obtained for internal use and for
determining when specific costs should be capitalized or expensed. The
adoption of SOP 98-1 had no impact on the Company's financial condition,
statement of operations or liquidity.
F-7
<PAGE> 10
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ACCOUNTING POLICIES
Investments
Fixed maturities include bonds, notes and redeemable preferred stocks. Fair
values of investments in fixed maturities are based on quoted market prices
or dealer quotes or, if these are not available, discounted expected cash
flows using market rates commensurate with the credit quality and maturity
of the investment. The effective yield used to determine amortization is
calculated based upon actual historical and projected future cash flows,
which are obtained from a widely-accepted securities data provider. Fixed
maturities are classified as "available for sale" and are reported at fair
value, with unrealized investment gains and losses, net of income taxes,
charged or credited directly to shareholder's equity.
Equity securities, which include common and non-redeemable preferred
stocks, are classified as "available for sale" and are carried at fair
value based primarily on quoted market prices. Changes in fair values of
equity securities are charged or credited directly to shareholder's equity,
net of income taxes.
Mortgage loans are carried at amortized cost. A mortgage loan is considered
impaired when it is probable that the Company will be unable to collect
principal and interest amounts due. For mortgage loans that are determined
to be impaired, a reserve is established for the difference between the
amortized cost and fair market value of the underlying collateral. In
estimating fair value, the Company uses interest rates reflecting the
current real estate financing market. Impaired loans were insignificant at
December 31, 1998 and 1997.
Short-term securities, consisting primarily of money market instruments and
other debt issues purchased with a maturity of less than one year, are
carried at amortized cost which approximates market.
Other invested assets include real estate joint ventures and partnership
investments accounted for on the equity method of accounting. All changes
in equity of these investments are recorded in net investment income.
Accrual of income, included in other assets, is suspended on fixed
maturities or mortgage loans that are in default, or on which it is likely
that future payments will not be made as scheduled. Interest income on
investments in default is recognized only as payment is received.
Included in investments are invested assets associated with Structured
Settlement Guaranteed Separate Accounts where the investment risk is borne
by the Company. See Note 6.
F-8
<PAGE> 11
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, including financial
futures contracts, options, forward contracts and interest rate swaps and
caps, as a means of hedging exposure to interest rate and foreign currency
risk. Hedge accounting is used to account for derivatives. To qualify for
hedge accounting the changes in value of the derivative must be expected to
substantially offset the changes in value of the hedged item. Hedges are
monitored to ensure that there is a high correlation between the derivative
instruments and the hedged investment.
Gains and losses arising from financial futures contracts are used to
adjust the basis of hedged investments and are recognized in net investment
income over the life of the investment.
Forward contracts, and options, and interest rate caps were not significant
at December 31, 1998 and 1997. Information concerning derivative financial
instruments is included in Note 4.
INVESTMENT GAINS AND LOSSES
Realized investment gains and losses are included as a component of pre-tax
revenues based upon specific identification of the investments sold on the
trade date. Also included are gains and losses arising from the
remeasurement of the local currency value of foreign investments to U.S.
dollars, the functional currency of the Company.
POLICY LOANS
Policy loans are carried at the amount of the unpaid balances that are not
in excess of the net cash surrender values of the related insurance
policies. The carrying value of policy loans, which have no defined
maturities, is considered to be fair value.
SEPARATE ACCOUNTS
The Company has separate account assets and liabilities representing funds
for which investment income and investment gains and losses accrue directly
to, and investment risk is borne by, the contractholders. Each of these
accounts have specific investment objectives. The assets and liabilities of
these accounts are carried at fair value, and amounts assessed to the
contractholders for management services are included in fee income.
Deposits, net investment income and realized investment gains and losses
for these accounts are excluded from revenues, and related liability
increases are excluded from benefits and expenses.
The Company also has a separate account for structured settlement annuity
obligations where the investment risk is borne by the Company. The assets
and liabilities of this separate account are included in investments,
future policy benefits and contractholder funds for financial reporting
purposes. See Note 6.
F-9
<PAGE> 12
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
DEFERRED ACQUISITION COSTS AND VALUE OF INSURANCE IN FORCE
Costs of acquiring individual life insurance and annuity business,
principally commissions and certain expenses related to policy issuance,
underwriting and marketing, all of which vary with and are primarily
related to the production of new business, are deferred. Acquisition costs
relating to traditional life insurance are amortized in relation to
anticipated premiums; universal life in relation to estimated gross
profits; and annuity contracts employing a level yield method. A 15 to 20
year amortization period is used for life insurance, and a 7 to 20 year
period is employed for annuities. Deferred acquisition costs are reviewed
periodically for recoverability to determine if any adjustment is required.
Adjustments, if any, are charged to income.
The value of insurance in force is an asset recorded at the time of
acquisition of an insurance company. It represents the actuarially
determined present value of anticipated profits to be realized from annuity
contracts at the date of acquisition using the same assumptions that were
used for computing related liabilities, where appropriate. The value of
insurance in force was the actuarially determined present value of the
projected future profits discounted at an interest rate of 16% for the
annuity business acquired. The annuity contracts are amortized employing a
level yield method. The value of insurance in force is reviewed
periodically for recoverability to determine if any adjustment is required.
Adjustments, if any, are charged to income.
FUTURE POLICY BENEFITS
Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuity policies have
been computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 3.0% to 7.5%,
including a provision for adverse deviation. These assumptions consider
Company experience and industry standards. The assumptions vary by plan,
age at issue, year of issue and duration.
CONTRACTHOLDER FUNDS
Contractholder funds represent receipts from the issuance of universal
life, certain individual annuity contracts, and structured settlement
contracts. Contractholder fund balances are increased by such receipts and
credited interest and reduced by withdrawals, mortality charges and
administrative expenses charged to the contractholders. Interest rates
credited to contractholder funds range from 3.3% to 7.2%.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company, domiciled in the State of Connecticut, prepares statutory
financial statements in accordance with the accounting practices prescribed
or permitted by the State of Connecticut Insurance Department. Prescribed
statutory accounting practices include certain publications of the National
Association of Insurance Commissioners (NAIC) as well as state laws,
regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so prescribed.
The impact of any permitted accounting practices on the statutory surplus
of the Company is not material.
F-10
<PAGE> 13
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The NAIC recently completed a process intended to codify statutory
accounting practices for certain insurance enterprises. As a result of this
process, the NAIC will issue a revised statutory Accounting Practices and
Procedures Manual - version effective January 1, 2001 (the revised Manual)
that will be effective January 1, 2001 for the calendar year 2001 statutory
financial statements. It is expected that the State of Connecticut will
require that, effective January 1, 2001, insurance companies domiciled in
Connecticut prepare their statutory basis financial statements in
accordance with the revised Manual subject to any deviations prescribed or
permitted by the Connecticut insurance commissioner. The Company has not
yet determined the impact that this change will have on its statutory
capital and surplus.
PREMIUMS
Premiums are recognized as revenues when due. Reserves are established for
the portion of premiums that will be earned in future periods.
OTHER REVENUES
Other revenues include surrender, mortality and administrative charges, and
fees earned on investment and other insurance contracts.
FEDERAL INCOME TAXES
The provision for federal income taxes comprises two components, current
income taxes and deferred income taxes. Deferred federal income taxes arise
from changes during the year in cumulative temporary differences between
the tax basis and book basis of assets and liabilities. The deferred
federal income tax asset is recognized to the extent that future
realization of the tax benefit is more likely than not, with a valuation
allowance for the portion that is not likely to be recognized.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
In December 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments" (SOP 97-3). SOP 97-3 provides guidance for
determining when an entity should recognize a liability for guaranty-fund
and other insurance-related assessments, how to measure that liability, and
when an asset may be recognized for the recovery of such assessments
through premium tax offsets or policy surcharges. This SOP is effective for
financial statements for fiscal years beginning after December 15, 1998,
and the effect of initial adoption is to be reported as a cumulative
catch-up adjustment. Restatement of previously issued financial statements
is not allowed. The Company plans to implement SOP 97-3 in the first
quarter of 1999 and expects there to be no material impact on the Company's
financial condition, results of operations or liquidity.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). This statement establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments imbedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value.
F-11
<PAGE> 14
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
If certain conditions are met, a derivative may be specifically designated
as (a) a hedge of the exposure to changes in the fair value of a recognized
asset or liability or an unrecognized firm commitment, (b) a hedge of the
exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security,
or a foreign-currency-denominated forecasted transaction. The accounting
for changes in the fair value of a derivative (that is, gains and losses)
depends on the intended use of the derivative and the resulting
designation. FAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Upon initial application of FAS 133, hedging
relationships must be designated anew and documented pursuant to the
provisions of this statement. The Company has not yet determined the impact
that FAS 133 will have on its financial statements.
2. REINSURANCE
The Company participates in reinsurance in order to limit losses, minimize
exposure to large risks, provide capacity for future growth and to effect
business-sharing arrangements. The Company remains primarily liable as the
direct insurer on all risks reinsured.
Life insurance in force ceded to TIC at December 31, 1998 and 1997 was
$69.6 million and $76.4 million, respectively. Life insurance premiums
ceded were $4.2 million, $2.4 million and $1.3 million in 1998, 1997 and
1996, respectively. Life insurance premiums ceded to non-affiliates were
insignificant. Life insurance in force ceded to non-affiliates at December
31, 1998 and 1997, was $8.8 billion and $4.5 billion, respectively.
3. SHAREHOLDER'S EQUITY
Unrealized Investment Gains (Losses)
See Note 11 for an analysis of the change in unrealized gains and losses on
investments.
Shareholder's Equity and Dividend Availability
The Company's statutory net income (loss) was $(3.2) million, $80.3 million
and $17.9 million for the years ended December 31, 1998, 1997 and 1996,
respectively.
Statutory capital and surplus was $328.2 million at both December 31, 1998
and 1997.
The Company is currently subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to its parent
without prior approval of insurance regulatory authorities. Statutory
surplus of $32.8 million is available in 1999 for dividend payments by the
Company without prior approval of the Connecticut Insurance Department.
F-12
<PAGE> 15
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
TAX EFFECTS ALLOCATED TO EACH COMPONENT OF
OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
<TABLE>
<CAPTION>
For the years ended December 31, PRE-TAX AMOUNT TAX EXPENSE/ AFTER-TAX
($ in thousands) (BENEFIT) AMOUNT
---------------------------------------------------------------- --------------- ---------------- --------------
<S> <C> <C> <C>
1998
Unrealized gain on investment securities:
Unrealized holding gains arising during year $45,589 $15,957 $29,632
Less: reclassification adjustment for gains
realized in net income 18,493 6,473 12,020
---------------------------------------------------------------- --------------- ---------------- --------------
Other changes in equity from non-owner sources $27,096 $9,484 $17,612
================================================================ =============== ================ ==============
1997
Unrealized gain on investment securities:
Unrealized holding gains arising during year $100,903 $35,316 $65,587
Less: reclassification adjustment for gains
realized in net income 44,871 15,705 29,166
---------------------------------------------------------------- --------------- ---------------- --------------
Other changes in equity from non-owner sources $56,032 $19,611 $36,421
================================================================ =============== ================ ==============
1996
Unrealized gain (loss) on investment securities:
Unrealized holding gains (losses) arising during year $(11,881) $4,158 $(7,723)
Less: reclassification adjustment for losses realized
in net income (9,613) (3,364) (6,249)
---------------------------------------------------------------- --------------- ---------------- --------------
Other changes in equity from non-owner sources $(2,268) $794 $(1,474)
================================================================ =============== ================ ==============
</TABLE>
4. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Financial Instruments
The Company uses derivative financial instruments, including financial
futures, forward contracts and interest rate swaps as a means of hedging
exposure to foreign currency, equity price changes and/or interest rate
risk on anticipated transactions or existing assets and liabilities. The
Company does not hold or issue derivative instruments for trading purposes.
These derivative financial instruments have off-balance sheet risk.
Financial instruments with off-balance sheet risk involve, to varying
degrees, elements of credit and market risk in excess of the amount
recognized in the balance sheet. The contract or notional amounts of these
instruments reflect the extent of involvement the Company has in a
particular class of financial instrument.
However, the maximum loss of cash flow associated with these instruments
can be less than these amounts. For forward contracts and interest rate
swaps, credit risk is limited to the amounts that it would cost the Company
to replace such contracts. Financial futures contracts and purchased listed
option contracts have little credit risk since organized exchanges are the
counterparties.
F-13
<PAGE> 16
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Company monitors creditworthiness of counterparties to these financial
instruments by using criteria of acceptable risk that are consistent with
on-balance sheet financial instruments. The controls include credit
approvals, limits and other monitoring procedures.
The Company uses exchange traded financial futures contracts to manage its
exposure to changes in interest rates and equity prices which arise from
the sale of certain insurance and investment products, or the need to
reinvest proceeds from the sale or maturity of investments. To hedge
against adverse changes in interest rates and equity prices, the Company
enters long or short positions in financial futures contracts which offset
changes in the fair value of investments and liabilities resulting from
changes in market interest rates or equity prices until an investment is
purchased, a product is sold or a liability is settled.
Margin payments are required to enter a futures contract and contract gains
or losses are settled daily in cash. The contract amount of futures
contracts represents the extent of the Company's involvement, but not
future cash requirements, as open positions are typically closed out prior
to the delivery date of the contract.
At December 31, 1998 and 1997, the Company held financial futures contracts
with notional amounts of $41.5 million and $156.3 million, respectively. At
December 31, 1998 and 1997, the Company's futures contracts had no fair
value because these contracts are marked to market and settled in cash
daily.
The Company enters into interest rate swaps in connection with other
financial instruments to provide greater risk diversification and better
match an asset with a corresponding liability. Under interest rate swaps,
the Company agrees with other parties to exchange, at specific intervals,
the difference between fixed-rate and floating-rate interest amounts
calculated by reference to a notional principal amount. Generally, no cash
is exchanged at the outset of the contract and no principal payments are
made by either party. A single net payment is usually made by one
counterparty at each due date. Swaps are not exchange traded and are
subject to the risk of default by the counterparty.
As of December 31, 1998 and 1997, the Company held interest rate swap
contracts with notional amounts of $165.3 million and $17.3 million,
respectively. The fair value of these financial instruments was $3.4
million (gain position) and $.7 million (loss position) at December 31,
1998 and was $.7 million (loss position) at December 31, 1997. The fair
values were determined using the discounted cash flow method.
The off-balance sheet risks of forward contracts were not significant at
December 31, 1998 and 1997.
Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Company issues fixed and variable
rate loan commitments and has unfunded commitments to partnerships. The
off-balance sheet risk of these financial instruments was not significant
at December 31, 1998 and 1997.
F-14
<PAGE> 17
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of its
business. Fair values of financial instruments that are considered
insurance contracts are not required to be disclosed and are not included
in the amounts discussed.
At December 31, 1998, investments in fixed maturities had a carrying value
and a fair value of $1.8 billion, compared with a carrying value and a fair
value of $1.7 billion at December 31, 1997. See Notes 1 and 11.
At December 31, 1998, mortgage loans had a carrying value of $174.6 million
and a fair value of $185.7 million and in 1997 had a carrying value of
$160.2 million and a fair value of $172.6 million. In estimating fair
value, the Company used interest rates reflecting the current real estate
financing market.
The carrying values of $36.5 million and $54.4 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1998 and 1997, respectively. The carrying values of $98.4
million and $70.5 million of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1998 and
1997, respectively. Fair value is determined using various methods,
including discounted cash flows, as appropriate for the various financial
instruments.
At December 31, 1998, contractholder funds with defined maturities had a
carrying value of $725.6 million and a fair value of $698.1 million,
compared with a carrying value of $694.9 million and a fair value of $695.9
million at December 31, 1997. The fair value of these contracts is
determined by discounting expected cash flows at an interest rate
commensurate with the Company's credit risk and the expected timing of cash
flows. Contractholder funds without defined maturities had a carrying value
of $483.0 million and a fair value of $442.5 million at December 31, 1998,
compared with a carrying value of $98.5 million and a fair value of $93.9
million at December 31, 1997. These contracts generally are valued at
surrender value.
The carrying values of short-term securities and policy loans approximated
their fair values.
5. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance Sheet Risk
See Note 4.
Litigation
The Company is a defendant in various litigation matters in the normal
course of business. Although there can be no assurances, as of December 31,
1998, the Company believes, based on information currently available, that
the ultimate resolution of these legal proceedings would not be likely to
have a material adverse effect on its results of operations, financial
condition or liquidity.
F-15
<PAGE> 18
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
6. STRUCTURED SETTLEMENT CONTRACTS
The Company has structured settlement contracts that provide guarantees for
the contractholders independent of the investment performance of the assets
held in the related separate account. The assets held in the separate
account are owned by the Company and contractholders do not share in their
investment performance.
The Company maintains assets sufficient to fund the guaranteed benefits
attributable to the liabilities. Assets held in the separate account cannot
be used to satisfy any other obligations of the Company.
The Company reports the related assets and liabilities in investments,
future policy benefit reserves and contractholder funds.
These contracts were purchased by the insurance subsidiaries of Travelers
Property Casualty Corp. (TAP), an affiliate of the Company, in connection
with the settlement of certain of their policyholder obligations. Effective
April 1, 1998, all new contracts have been written by TIC.
7. BENEFIT PLANS
Pension and Other Postretirement Benefits
The Company participates in a qualified, noncontributory defined benefit
pension plan sponsored by Citigroup. In addition, the Company provides
certain other postretirement benefits to retired employees through a plan
sponsored by The Travelers Insurance Group Inc. (TIGI), TIC's direct
parent. The Company's share of net expense for the qualified pension and
other postretirement benefit plans was not significant for 1998, 1997 and
1996.
401(k) Savings Plan
Substantially all of the Company's employees are eligible to participate in
a 401(k) savings plan sponsored by Citigroup. During 1996, the Company made
matching contributions in an amount equal to the lesser of 100% of the
pre-tax contributions made by the employee or $1,000. Effective January 1,
1997, the Company discontinued matching contributions for the majority of
its employees. The Company's expenses in connection with the 401(k) savings
plan were not significant in 1998, 1997 and 1996.
F-16
<PAGE> 19
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
8. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI, including the
Company, are handled by two companies. TIC handles banking functions for
the life and annuity operations of Travelers Life & Annuity and some of its
non-insurance affiliates. The Travelers Indemnity Company handles banking
functions for the property-casualty operations, including most of its
property-casualty insurance and non-insurance affiliates. Settlements
between companies are made at least monthly. TIC provides various employee
benefit coverages to certain subsidiaries of TIGI. The premiums for these
coverages were charged in accordance with cost allocation procedures based
upon salaries or census. In addition, investment advisory and management
services, data processing services and claims processing services are
provided by affiliated companies. Charges for these services are shared by
the companies on cost allocation methods based generally on estimated usage
by department.
TIC maintains a short-term investment pool in which the Company
participates. The position of each company participating in the pool is
calculated and adjusted daily. At December 31, 1998 and 1997, the pool
totaled approximately $2.3 billion and $2.6 billion, respectively. The
Company's share of the pool amounted to $93.1 million and $145.5 million at
December 31, 1998 and 1997, respectively, and is included in short-term
securities in the balance sheet.
The Company's TTM Modified Guaranteed Annuity Contracts are subject to a
limited guarantee agreement by TIC in a principal amount of up to $450
million. TIC's obligation is to pay in full to any owner or beneficiary of
the TTM Modified Guaranteed Annuity Contracts principal and interest as and
when due under the annuity contract to the extent that the Company fails to
make such payment. In addition, TIC guarantees that the Company will
maintain a minimum statutory capital and surplus level.
The Company sold structured settlement annuities to the insurance
affiliates of Travelers Property Casualty (TAP). Premiums and deposits were
$8.9 million, $70.6 million and $36.9 million for 1998, 1997 and 1996,
respectively. The reduction in premiums and deposits from 1997 to 1998 was
a result of a decision to use TIC as the primary issuer of structured
settlement annuities and the Company as the assignment company. Policy
reserves and contractholder fund liabilities associated with these
structured settlements were $808.7 and $842.3 million at December 31, 1998
and 1997, respectively.
The Company began marketing variable annuity products through its
affiliate, Salomon Smith Barney Inc. (SSB) in 1995. Premiums and deposits
related to these products were $932.1 million, $615.6 million and $300.0
million in 1998, 1997 and 1996, respectively. In 1996, the Company began
marketing various life products through SSB as well. Premiums related to
such products were $42.1 million, $25.1 million and $20.5 million in 1998,
1997 and 1996, respectively.
During 1998, the Company began marketing deferred annuity products through
its affiliate Primerica Financial Services (Primerica). Deposits received
were $216 million.
The Company participates in a stock option plan sponsored by Citigroup that
provides for the granting of stock options in Citigroup common stock to
officers and key employees. To further encourage employee stock ownership,
during 1997 the Company's ultimate parent introduced the WealthBuilder
stock option program. Under this program, all employees meeting certain
requirements are granted Citigroup stock options.
F-17
<PAGE> 20
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Most leasing functions for TIGI and its subsidiaries are handled by TAP.
Rent expense related to these leases are shared by the companies on a cost
allocation method based generally on estimated usage by department. The
Company's rent expense was insignificant in 1998, 1997 and 1996.
At December 31, 1998 and 1997, the Company had investments in Tribeca
Investments, L.L.C., an affiliate of the Company in the amounts of $18.3
million and $16.5 million, included in other invested assets.
9. FEDERAL INCOME TAXES ($ in thousands)
EFFECTIVE TAX RATE
<TABLE>
<CAPTION>
--------------------------------------------------------- ----------------- ---------------- -----------------
FOR THE YEAR ENDED DECEMBER 31, 1998 1997 1996
--------------------------------------------------------- ----------------- ---------------- -----------------
<S> <C> <C> <C>
Income Before Federal Income Taxes $88,185 $109,575 $39,582
Statutory Tax Rate 35% 35% 35%
--------------------------------------------------------- ----------------- ---------------- -----------------
Expected Federal Income Taxes 30,865 38,351 13,854
Tax Effect of:
Non-taxable investment income (20) (24) (15)
Other, net (145) (124) (48)
--------------------------------------------------------- ----------------- ---------------- -----------------
Federal Income Taxes $30,700 $38,203 $13,791
========================================================= ================= ================ =================
Effective Tax Rate 35% 35% 35%
--------------------------------------------------------- ----------------- ---------------- -----------------
COMPOSITION OF FEDERAL INCOME TAXES 1998 1998 1996
---- ---- ----
Current:
United States $18,794 $33,805 $29,435
Foreign 123 54 21
--------------------------------------------------------- ----------------- ---------------- -----------------
Total 18,917 33,859 29,456
--------------------------------------------------------- ----------------- ---------------- -----------------
Deferred:
United States 11,783 4,344 (15,665)
--------------------------------------------------------- ----------------- ---------------- -----------------
Federal Income Taxes $30,700 $38,203 $13,791
========================================================= ================= ================ =================
</TABLE>
F-18
<PAGE> 21
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The net deferred tax assets at December 31, 1998 and 1997 were comprised of
the tax effects of temporary differences related to the following assets
and liabilities:
<TABLE>
<CAPTION>
($ in thousands) 1998 1997
---- ----
--------------------------------------------------------------------- ---------------- --------------
<S> <C> <C>
Deferred Tax Assets:
Benefit, reinsurance and other reserves $121,150 $100,969
Other 2,810 2,571
--------------------------------------------------------------------- ---------------- --------------
Total 123,960 103,540
--------------------------------------------------------------------- ---------------- --------------
Deferred Tax Liabilities:
Investments, net 56,103 42,933
Deferred acquisition costs and value of insurance in force 51,993 23,650
Other 1,399 1,226
--------------------------------------------------------------------- ---------------- --------------
Total 109,495 67,809
--------------------------------------------------------------------- ---------------- --------------
Net Deferred Tax Asset Before Valuation Allowance 14,465 35,731
Valuation Allowance for Deferred Tax Assets (2,070) (2,070)
--------------------------------------------------------------------- ---------------- --------------
Net Deferred Tax Asset After Valuation Allowance $12,395 $33,661
--------------------------------------------------------------------- ---------------- --------------
</TABLE>
TIC and its life insurance subsidiaries, including the Company, has filed,
and will file, a consolidated federal income tax return. Federal income
taxes are allocated to each member on a separate return basis adjusted for
credits and other amounts required by the consolidation process. Any
resulting liability has been, and will be, paid currently to TIC. Any
credits for losses have been, and will be, paid by TIC to the extent that
such credits are for tax benefits that have been utilized in the
consolidated federal income tax return.
The $2.1 million valuation allowance is sufficient to cover any capital
losses on investments that may exceed the capital gains able to be
generated in the life insurance group's consolidated federal income tax
return based upon management's best estimate of the character of the
reversing temporary differences. Reversal of the valuation allowance is
contingent upon the recognition of future capital gains or a change in
circumstances that causes the recognition of the benefits to become more
likely than not. There was no change in the valuation allowance during
1998. The initial recognition of any benefit provided by the reversal of
the valuation allowance will be recognized by reducing goodwill.
F-19
<PAGE> 22
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
In management's judgment, the $12.4 million "net deferred tax asset after
valuation allowance" as of December 31, 1998, is fully recoverable against
expected future years' taxable ordinary income and capital gains. At
December 31, 1998, the Company has no ordinary or capital loss
carryforwards.
The policyholders surplus account, which arose under prior tax law, is
generally that portion of the gain from operations that has not been
subjected to tax, plus certain deductions. The balance of this account is
approximately $2 million. Income taxes are not provided for on this amount
because under current U.S. tax rules such taxes will become payable only to
the extent such amounts are distributed as a dividend to exceed limits
prescribed by federal law. Distributions are not contemplated from this
account. At current rates the maximum amount of such tax would be
approximately $700 thousand.
10. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
-------------------------------------------------------------- --------------- --------------- --------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1998 1997 1996
-------------------------------------------------------------- --------------- --------------- --------------
<S> <C> <C> <C>
GROSS INVESTMENT INCOME
Fixed maturities $130,825 $120,900 $113,296
Joint venture and partnership income 22,107 32,336 19,775
Mortgage loans 15,969 14,905 18,278
Other 3,322 2,284 4,113
-------------------------------------------------------------- --------------- --------------- --------------
172,223 170,425 155,462
-------------------------------------------------------------- --------------- --------------- --------------
Investment expenses 1,220 1,772 4,136
-------------------------------------------------------------- --------------- --------------- --------------
Net investment income $171,003 $168,653 $151,326
-------------------------------------------------------------- --------------- --------------- --------------
</TABLE>
11. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------- --------------- --------------- ---------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1998 1997 1996
---------------------------------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
REALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $15,620 $29,236 $(11,491)
Equity securities 1,819 8,385 4,613
Mortgage loans 623 (8) 1,979
Real estate held for sale - 2,164 (73)
Other 431 5,094 (4,641)
---------------------------------------------------------------- --------------- --------------- ---------------
Total Realized Investment Gains (Losses) $18,493 $44,871 $(9,613)
---------------------------------------------------------------- --------------- --------------- ---------------
</TABLE>
F-20
<PAGE> 23
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Changes in net unrealized investment gains (losses) that are included as
accumulated other changes in equity from non-owner sources in shareholder's
equity were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------- --------------- --------------- ---------------
FOR THE YEAR ENDED DECEMBER 31,
($ in thousands) 1998 1997 1996
---------------------------------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
UNREALIZED INVESTMENT GAINS (LOSSES)
Fixed maturities $24,336 $34,451 $(23,953)
Equity securities (338) (2,394) (746)
Other 3,098 23,975 22,431
---------------------------------------------------------------- --------------- --------------- ---------------
Total Unrealized Investment Gains (Losses) 27,096 56,032 (2,268)
Related taxes 9,484 19,611 (794)
---------------------------------------------------------------- --------------- --------------- ---------------
Change in unrealized investment gains (losses) 17,612 36,421 (1,474)
Balance beginning of year 70,277 33,856 35,330
---------------------------------------------------------------- --------------- --------------- ---------------
Balance End of Year $87,889 $70,277 $33,856
---------------------------------------------------------------- --------------- --------------- ---------------
</TABLE>
Fixed Maturities
Proceeds from sales of fixed maturities classified as available for sale
were $1.1 billion, $.9 billion and $1.0 billion in 1998, 1997 and 1996,
respectively. Gross gains of $32.6 million, $38.1 million and $8.4 million
and gross losses of $17.0 million, $8.9 million and $19.9 million in 1998,
1997 and 1996, respectively were realized on those sales.
Fair values of investments in fixed maturities are based on quoted market
prices or dealer quotes or, if these are not available, discounted expected
cash flows using market rates commensurate with the credit quality and
maturity of the investment. The fair value of investments for which a
quoted market price or dealer quote are not available amounted to $427.0
million and $485.3 million at December 31, 1998 and 1997, respectively.
F-21
<PAGE> 24
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The amortized cost and fair values of investments in fixed maturities were
as follows:
<TABLE>
<CAPTION>
------------------------------------------------- ---------------- --------------- ---------------- ---------------
DECEMBER 31, 1998 GROSS GROSS
($ in thousands) AMORTIZED COST UNREALIZED UNREALIZED FAIR
GAINS LOSSES VALUE
------------------------------------------------- ---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $220,105 $ 11,571 $(193) $231,483
U.S. Treasury securities and obligations
of U.S. Government and government agencies
and authorities 289,376 53,782 (274) 342,884
Obligations of states and political
subdivisions 28,749 994 (17) 29,726
Debt securities issued by foreign
governments 40,786 2,966 (375) 43,377
All other corporate bonds 1,124,298 75,870 (13,000) 1,187,168
Redeemable preferred stock 4,033 119 (109) 4,043
------------------------------------------------- ---------------- --------------- ---------------- ---------------
Total Available For Sale $1,707,347 $145,302 $(13,968) $1,838,681
------------------------------------------------- ---------------- --------------- ---------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997 GROSS GROSS
($ in thousands) AMORTIZED COST UNREALIZED UNREALIZED FAIR
GAINS LOSSES VALUE
------------------------------------------------- ---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
Mortgage-backed securities - CMOs and
pass-through securities $144,921 $ 8,254 $(223) $152,952
U.S. Treasury securities and obligations
of U.S. Government and government agencies
and authorities 248,081 34,111 (123) 282,069
Obligations of states and political
subdivisions 14,560 392 (2) 14,950
Debt securities issued by foreign
governments 85,367 6,194 (228) 91,333
All other corporate bonds 1,077,211 59,972 (1,387) 1,135,796
Redeemable preferred stock 981 48 (9) 1,020
------------------------------------------------- ---------------- --------------- ---------------- ---------------
Total Available For Sale $1,571,121 $108,971 $(1,972) $1,678,120
------------------------------------------------- ---------------- --------------- ---------------- ---------------
</TABLE>
The amortized cost and fair value of fixed maturities available for sale at
December 31, 1998, by contractual maturity, are shown below. Actual
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
F-22
<PAGE> 25
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
----------------------------------------------------- ------------------ ------------------
($ in thousands) AMORTIZED FAIR
COST VALUE
----------------------------------------------------- ------------------ ------------------
<S> <C> <C>
MATURITY:
Due in one year or less $ 21,149 $ 21,655
Due after 1 year through 5 years 249,251 256,032
Due after 5 years through 10 years 356,358 379,061
Due after 10 years 860,484 950,450
----------------------------------------------------- ------------------ ------------------
1,487,242 1,607,198
----------------------------------------------------- ------------------ ------------------
Mortgage-backed securities 220,105 231,483
----------------------------------------------------- ------------------ ------------------
Total Maturity $1,707,347 $1,838,681
----------------------------------------------------- ------------------ ------------------
</TABLE>
The Company makes significant investments in collateralized mortgage
obligations (CMOs). CMOs typically have high credit quality, offer good
liquidity, and provide a significant advantage in yield and total return
compared to U.S. Treasury securities. The Company's investment strategy is
to purchase CMO tranches which are protected against prepayment risk,
including planned amortization class (PAC) tranches. Prepayment protected
tranches are preferred because they provide stable cash flows in a variety
of interest rate scenarios. The Company does invest in other types of CMO
tranches if a careful assessment indicates a favorable risk/return
tradeoff. The Company does not purchase residual interests in CMOs.
At December 31, 1998 and 1997, the Company held CMOs with a market value of
$181.6 million and $122.8 million, respectively. The Company's CMO holdings
were 62.9% and 97.5% collateralized by GNMA, FNMA or FHLMC securities at
December 31, 1998 and 1997, respectively.
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
--------------------------------------------- ----------- ---------------------- ---------------------- -----------
EQUITY SECURITIES: GROSS UNREALIZED GROSS UNREALIZED FAIR VALUE
($ in thousands) COST GAINS LOSSES
--------------------------------------------- ----------- ---------------------- ---------------------- -----------
<S> <C> <C> <C>
DECEMBER 31, 1998
Common stocks $ 5,185 $889 $(292) $5,782
Non-redeemable preferred stocks 20,641 707 (445) 20,903
--------------------------------------------- ----------- ---------------------- ---------------------- -----------
Total Equity Securities $25,826 $1,596 $(737) $26,685
--------------------------------------------- ----------- ---------------------- ---------------------- -----------
DECEMBER 31, 1997
Common stocks $3,318 $ 583 $(70) $3,831
Non-redeemable preferred stocks 11,774 931 (247) 12,458
--------------------------------------------- ----------- ---------------------- ---------------------- -----------
Total Equity Securities $15,092 $1,514 $(317) $16,289
--------------------------------------------- ----------- ---------------------- ---------------------- -----------
</TABLE>
F-23
<PAGE> 26
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Proceeds from sales of equity securities were $6.0 million, $12.4 million
and $12.8 million in 1998, 1997 and 1996, respectively. Gross gains of $2.6
million, $8.6 million and $4.7 million and gross losses of $815 thousand,
$172 thousand and $155 thousand in 1998, 1997 and 1996, respectively were
realized on those sales.
Mortgage Loans
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure and loans modified at interest rates below market.
At December 31, 1998 and 1997, the Company's mortgage loan portfolios
consisted of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------- --------------
($ in thousands) 1998 1997
- ----------------------------------------------------- ------------- --------------
<S> <C> <C>
Current Mortgage Loans $170,635 $160,247
Underperforming Mortgage Loans 3,930 -
- ----------------------------------------------------- ------------- --------------
Total 174,565 160,247
- ----------------------------------------------------- ------------- --------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------- -------
($ in thousands)
<S> <C>
Past Maturity $ 129
1999 11,649
2000 11,309
2001 8,697
2002 16,272
2003 4,998
Thereafter 121,511
- ----------------------------------------------------- -------
Total 174,565
===================================================== =======
</TABLE>
Joint Venture
In October 1997, TIC and Tishman Speyer Properties (Tishman), a worldwide
real estate owner, developer and manager, formed a joint real estate
venture with an initial equity commitment of $792 million. TIC and certain
of its affiliates committed $420 million in real estate equity and $100
million in cash while Tishman committed $272 million in properties and
cash. Both companies are serving as asset managers for the venture and
Tishman is primarily responsible for the venture's real estate acquisition
and development efforts. The Company's investment in the joint venture,
which is included in other invested assets, totaled $62.4 million and $54.8
million at December 31, 1998 and 1997, respectively.
F-24
<PAGE> 27
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Concentrations
The Company's significant individual investment concentrations included
$53.3 million and $32.7 million in Bellsouth Corp. at December 31, 1998 and
1997, respectively. In addition, there was an investment of $50.8 million
in the State of Israel in 1997.
The Company participates in a short-term investment pool maintained by an
affiliate. See Note 8.
Included in fixed maturities are below investment grade assets totaling
$102.4 million and $76.7 million at December 31, 1998 and 1997,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or the
equivalent by internal analysts when a public rating does not exist. Such
assets include publicly traded below investment grade bonds and certain
other privately issued bonds that are classified as below investment grade
bonds.
The Company's three largest industry concentrations of investments,
primarily fixed maturities, were as follows:
<TABLE>
<CAPTION>
-------------------------------------------- ----------- -----------
($ in thousands) 1998 1997
-------------------------------------------- ----------- -----------
<S> <C> <C>
Banking $160,713 $130,966
Transportation 155,116 138,903
Electric utilities 109,027 106,724
-------------------------------------------- ----------- -----------
</TABLE>
Below investment grade assets included in the preceding table were not
significant.
Concentrations of mortgage loans by property type at December 31, 1998 and
1997 were as follows:
<TABLE>
<CAPTION>
-------------------------------------------- ----------- -----------
($ in thousands) 1998 1997
-------------------------------------------- ----------- -----------
<S> <C> <C>
Agricultural $78,579 $62,463
Office 51,813 47,453
-------------------------------------------- ----------- -----------
</TABLE>
The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and
other monitoring procedures. Collateral for fixed maturities often includes
pledges of assets, including stock and other assets, guarantees and letters
of credit. The Company's underwriting standards with respect to new
mortgage loans generally require loan to value ratios of 75% or less at the
time of mortgage origination.
Non-Income Producing Investments
There were no investments included in the balance sheets that were
non-income producing for the preceding 12 months.
F-25
<PAGE> 28
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Restructured Investments
Mortgage loan and debt securities which were restructured at below market
terms at December 31, 1998 and 1997 were insignificant. The new terms of
restructured investments typically defer a portion of contract interest
payments to varying future periods. The accrual of interest is suspended on
all restructured assets, and interest income is reported only as payment is
received. Gross interest income on restructured assets that would have been
recorded in accordance with the original terms of such assets was
insignificant. Interest on these assets, included in net investment income,
was insignificant.
12. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES
At December 31, 1998, the Company had $1.9 billion of life and annuity
deposit funds and reserves. Of that total, $1.5 billion were not subject to
discretionary withdrawal based on contract terms. The remaining $.4 billion
were life and annuity products that were subject to discretionary
withdrawal by the contractholders. Included in the amount that is subject
to discretionary withdrawal were $.2 billion of liabilities that are
surrenderable with market value adjustments. An additional $.2 billion of
life insurance and individual annuity liabilities are subject to
discretionary withdrawals with an average surrender charge of 4.6%. The
life insurance risks would have to be underwritten again if transferred to
another carrier, which is considered a significant deterrent for long-term
policyholders. Insurance liabilities that are surrendered or withdrawn from
the Company are reduced by outstanding policy loans and related accrued
interest prior to payout.
13. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
The following table reconciles net income to net cash provided by (used in)
operating activities:
<TABLE>
<CAPTION>
------------------------------------------------------------------ ------------- ------------- -------------
FOR THE YEAR ENDED DECEMBER 31, 1998 1997 1996
---- ---- ----
($ in thousands)
------------------------------------------------------------------ ------------- ------------- -------------
<S> <C> <C> <C>
Net Income From Continuing Operations $57,485 $71,372 $ 25,791
Adjustments to reconcile net income to cash provided by
operating activities:
Realized (gains) losses (18,493) (44,871) 9,613
Deferred federal income taxes 11,783 4,344 (15,665)
Amortization of deferred policy acquisition costs and
value of insurance in force 17,031 6,036 3,286
Additions to deferred policy acquisition costs (120,278) (56,975) (20,753)
Investment income accrued (3,821) 908 1,308
Premium balances receivable (6,786) (3,450) (3,561)
Insurance reserves and accrued expenses (8,431) 3,981 (16,459)
Other (3,881) 26,673 (13,419)
------------------------------------------------------------------ ------------- ------------- -------------
Net cash provided by (used in) operations $(75,391) $8,018 $(29,859)
------------------------------------------------------------------ ------------- ------------- -------------
</TABLE>
14. NON-CASH INVESTING AND FINANCING ACTIVITIES
There were no significant non-cash investing and financing activities for
1998, 1997 and 1996.
F-26
<PAGE> 29
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) The financial statements of the Registrant will not be provided since the
Registrant will have no assets as of the effective date of the Registrant
Statement.
The financial statements of The Travelers Life and Annuity Company and the
report of Independent Accountants, are contained in the Statement of
Additional Information. The financial statements of The Travelers Life and
Annuity Company include:
Statements of Income for the years ended December 31, 1998, 1997 and
1996.
Balance Sheets as of December 31, 1998 and 1997 Statements of
Changes in Retained Earnings and Accumulated Other Changes in Equity
from Non-Owner Sources for the years ended December 31, 1998, 1997 and
1996.
Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996 Notes to Financial Statements
(b) Exhibits
1. Resolution of The Travelers Life and Annuity Company Board of Directors
authorizing the establishment of the Registrant. (Incorporated herein by
reference to Exhibit 1 to the Registration Statement on Form N-4 filed
June 30, 1999.)
2. Not Applicable.
3(a). Distribution and Principal Underwriting Agreement among the Registrant,
The Travelers Life and Annuity Company and CFBDS, Inc. To be provided by
amendment.
3(b). Selling Agreement. (Incorporated herein by reference to Exhibit 3(b) to
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4,
File No. 333-60215 filed November 9, 1998)
4. Variable Annuity Contract. Incorporated herein by reference to Exhibit 4
to Pre-Effective Amendment No. 1 to the Registration Statement filed on
September 24, 1999.
5. Application. Incorporated herein by reference to Exhibit 5 to
Pre-Effective Amendment No. 1 to the Registration Statement filed on
September 24, 1999.
6(a). Charter of The Travelers Life and Annuity Company, as amended on April 10,
1990. (Incorporated herein by reference to Exhibit 6(a) to the
Registration Statement on Form N-4, File No. 333-40191, filed November 13,
1998.)
6(b). By-Laws of The Travelers Life and Annuity Company, as amended on October
20, 1994. (Incorporated herein by reference to Exhibit 6(b) to the
Registration Statement on Form N-4, File No. 333-40191, filed November 13,
1998.)
9. Opinion of Counsel as to the legality of securities being registered.
(Incorporated herein by reference to Exhibit 9 to the Registration
Statement on Form N-4 filed June 30, 1999.)
10. Consent of KPMG LLP, Independent Certified Public Accountants.
Incorporated herein by reference to Exhibit 10 to Pre-Effective Amendment
No. 1 to the Registration Statement filed on September 24, 1999.
13. Computation of Total Return Calculations - Standardized and
Non-Standardized. Incorporated herein by reference to Exhibit 13 to
Pre-Effective Amendment No. 1 to the Registration Statement filed on
September 24, 1999.
<PAGE> 30
15. Powers of Attorney authorizing Ernest J. Wright or Kathleen A. McGah as
signatory for Michael A. Carpenter, J. Eric Daniels, Jay S. Benet, George
C. Kokulis, Robert I. Lipp, Katherine M. Sullivan and Marc P. Weill.
(Incorporated herein by reference to Exhibit 15 to the Registration
Statement on Form N-4 filed June 30, 1999.)
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor
<S> <C>
Name and Principal Positions and Offices
Business Address with Insurance Company
- ---------------- ----------------------
Michael A. Carpenter* Director, Chairman of the Board
J. Eric Daniels** Director, President and Chief Executive Officer
Jay S. Benet** Director and Senior Vice President
Chief Financial Officer, Chief
Accounting Officer and Controller
George C. Kokulis** Director and Executive Vice President
Robert I. Lipp** Director
Katherine M. Sullivan** Director and Senior Vice President
Marc P. Weill* Director and Senior Vice President
Stuart Baritz*** Senior Vice President
Elizabeth C. Georgakopoulos** Senior Vice President
Barry Jacobson** Senior Vice President
Russell H. Johnson** Senior Vice President
Marla Berman Lewitus** Senior Vice President and General Counsel
Warren H. May** Senior Vice President
Christine M. Modie** Senior Vice President
Kathleen Preston** Senior Vice President
Mary Jean Thornton** Senior Vice President
David A. Tyson** Senior Vice President
F. Denney Voss* Senior Vice President
Virginia M. Meany** Vice President
Ernest J. Wright** Vice President and Secretary
Kathleen A. McGah** Assistant Secretary and Deputy General Counsel
Donald R. Munson, Jr.** Second Vice President
Anthony Cocolla** Second Vice President
Scott R. Hansen** Second Vice President
Principal Business Address:
* Citigroup Inc. ** The Travelers Insurance Company
388 Greenwich Street One Tower Square
New York, NY 10013 Hartford, CT 06183
*** Travelers Portfolio Group
1345 Avenue of the Americas
New York, NY 10105
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
Incorporated herein by reference to Exhibit 16 to Post-Effective Amendment
No. 2 to the Registration Statement on Form N-4, File No. 333-27689, filed April
16, 1999.
<PAGE> 31
Item 27. Number of Contract Owners
Not applicable.
Item 28. Indemnification
Sections 33-770 to 33-778, inclusive of the Connecticut General Statutes
("C.G.S.") regarding indemnification of directors and officers of Connecticut
corporations provides in general that Connecticut corporations shall indemnify
their officers, directors and certain other defined individuals against
judgments, fines, penalties, amounts paid in settlement and reasonable expenses
actually incurred in connection with proceedings against the corporation. The
corporation's obligation to provide such indemnification generally does not
apply unless (1) the individual is wholly successful on the merits in the
defense of any such proceeding; or (2) a determination is made (by persons
specified in the statute) that the individual acted in good faith and in the
best interests of the corporation and in all other cases, his conduct was at
least not opposed to the best interests of the corporation, and in a criminal
case he had no reasonable cause to believe his conduct was unlawful; or (3) the
court, upon application by the individual, determines in view of all of the
circumstances that such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine. With respect
to proceedings brought by or in the right of the corporation, the statute
provides that the corporation shall indemnify its officers, directors and
certain other defined individuals, against reasonable expenses actually incurred
by them in connection with such proceedings, subject to certain limitations.
Citigroup Inc. also provides liability insurance for its directors and officers
and the directors and officers of its subsidiaries, including the Registrant.
This insurance provides for coverage against loss from claims made against
directors and officers in their capacity as such, including, subject to certain
exceptions, liabilities under the federal securities laws.
Rule 484 Undertaking
Insofar as indemnification for liability 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.
Item 29. Principal Underwriter
(a) CFBDS, Inc.
21 Milk Street
Boston, MA 02109
CFBDS, Inc. also serves as principal underwriter for the following :
(a) CFBDS, the Registrant's Distributor, is also the distributor for
CitiFunds(SM) International Growth & Income Portfolio, CitiFunds(SM)
International Growth Portfolio, CitiFunds(SM) U.S.
<PAGE> 32
Treasury Reserves, CitiFunds(SM) Cash Reserves, CitiFunds(SM) Premium U.S.
Treasury Reserves, CitiFunds(SM) Premium Liquid Reserves, CitiFunds(SM)
Institutional U.S. Treasury Reserves, CitiFunds(SM) Institutional Liquid
Reserves, CitiFunds(SM) Institutional Cash Reserves, CitiFunds(SM) Tax Free
Reserves, CitiFunds(SM) Institutional Tax Free Reserves, CitiFunds(SM)
California Tax Free Reserves, CitiFunds(SM) Connecticut Tax Free Reserves,
CitiFunds(SM) New York Tax Free Reserves, CitiFunds(SM) New York Tax Free Income
Portfolio, CitiFunds(SM) National Tax Free Income Portfolio, CitiFunds(SM)
California Tax Free Income Portfolio, CitiFunds(SM) Intermediate Income
Portfolio, CitiFunds(SM) Balanced Portfolio, CitiFunds(SM) Small Cap Value
Portfolio, CitiFunds(SM) Growth & Income Portfolio, CitiFunds(SM) Large Cap
Growth Portfolio, CitiFunds(SM) Small Cap Growth Portfolio, CitiSelect(R) VIP
Folio 200, CitiSelect(R) VIP Folio 300, CitiSelect(R) VIP Folio 400,
CitiSelect(R) VIP Folio 500, CitiFunds(SM) Small Cap Growth VIP Portfolio,
CitiSelect(R) Folio 100, CitiSelect(R) Folio 200, CitiSelect(R) Folio 300,
CitiSelect(R) Folio 400, and CitiSelect(R) Folio 500.
CFBDS is also the placement agent for Large Cap Value Portfolio, Small Cap Value
Portfolio, International Portfolio, Foreign Bond Portfolio, Intermediate Income
Portfolio, Short-Term Portfolio, Growth & Income Portfolio, U.S. Fixed Income
Portfolio, High Yield Portfolio, Large Cap Growth Portfolio, Small Cap Growth
Portfolio, International Equity Portfolio, Balanced Portfolio, Government Income
Portfolio, Tax Free Reserves Portfolio, Cash Reserves Portfolio and U.S.
Treasury Reserves Portfolio.
CFBDS also serves as the distributor for the following funds: The Travelers Fund
U for Variable Annuities, The Travelers Fund VA for Variable Annuities, The
Travelers Fund BD for Variable Annuities, The Travelers Fund BD II for Variable
Annuities, The Travelers Fund BD III for Variable Annuities, The Travelers Fund
BD IV for Variable Annuities, The Travelers Fund ABD for Variable Annuities, The
Travelers Fund ABD II for Variable Annuities, The Travelers Separate Account PF
for Variable Annuities, The Travelers Separate Account PF II for Variable
Annuities, The Travelers Separate Account QP for Variable Annuities, The
Travelers Separate Account TM for Variable Annuities, The Travelers Separate
Account TM II for Variable Annuities, The Travelers Separate Account Five for
Variable Annuities, The Travelers Separate Account Six for Variable Annuities,
The Travelers Separate Account Seven for Variable Annuities, The Travelers
Separate Account Eight for Variable Annuities, The Travelers Fund UL for
Variable Life Insurance, The Travelers Fund UL II for Variable Life Insurance,
The Travelers Fund UL III for Variable Life Insurance, The Travelers Variable
Life Insurance Separate Account One, The Travelers Variable Life Insurance
Separate Account Two, The Travelers Variable Life Insurance Separate Account
Three, The Travelers Variable Life Insurance Separate Account Four, The
Travelers Separate Account MGA, The Travelers Separate Account MGA II, The
Travelers Growth and Income Stock Account for Variable Annuities, The Travelers
Quality Bond Account for Variable Annuities, The Travelers Money Market Account
for Variable Annuities, The Travelers Timed Growth and Income Stock Account for
Variable Annuities, The Travelers Timed Short-Term Bond Account for Variable
Annuities, The Travelers Timed Aggressive Stock Account for Variable Annuities,
The Travelers Timed Bond Account for Variable Annuities, Emerging Growth Fund,
Government Fund, Growth and Income Fund, International Equity Fund, Municipal
Fund, Balanced Investments, Emerging Markets Equity Investments, Government
Money Investments, High Yield Investments, Intermediate Fixed Income
Investments, International Equity Investments, International Fixed Income
Investments, Large Capitalization Growth Investments, Large Capitalization Value
Equity Investments, Long-Term Bond Investments, Mortgage Backed Investments,
Municipal Bond Investments, Small Capitalization Growth Investments, Small
<PAGE> 33
Capitalization Value Equity Investments, Appreciation Portfolio, Diversified
Strategic Income Portfolio, Emerging Growth Portfolio, Equity Income Portfolio,
Equity Index Portfolio, Growth & Income Portfolio, Intermediate High Grade
Portfolio, International Equity Portfolio, Money Market Portfolio, Total Return
Portfolio, Smith Barney Adjustable Rate Government Income Fund, Smith Barney
Aggressive Growth Fund Inc., Smith Barney Appreciation Fund, Smith Barney
Arizona Municipals Fund Inc., Smith Barney California Municipals Fund Inc.,
Balanced Portfolio, Conservative Portfolio, Growth Portfolio, High Growth
Portfolio, Income Portfolio, Global Portfolio, Select Balanced Portfolio, Select
Conservative Portfolio, Select Growth Portfolio, Select High Growth Portfolio,
Select Income Portfolio, Concert Social Awareness Fund, Smith Barney Large Cap
Blend Fund, Smith Barney Fundamental Value Fund Inc., Large Cap Value Fund,
Short-Term High Grade Bond Fund, U.S. Government Securities Fund, Smith Barney
Balanced Fund, Smith Barney Convertible Fund, Smith Barney Diversified Strategic
Income Fund, Smith Barney Exchange Reserve Fund, Smith Barney High Income Fund,
Smith Barney Municipal High Income Fund, Smith Barney Premium Total Return Fund,
Smith Barney Total Return Bond Fund, Cash Portfolio, Government Portfolio,
Municipal Portfolio, Concert Peachtree Growth Fund, Smith Barney Contrarian
Fund, Smith Barney Government Securities Fund, Smith Barney Hansberger Global
Small Cap Value Fund, Smith Barney Hansberger Global Value Fund, Smith Barney
Investment Grade Bond Fund, Smith Barney Special Equities Fund, Smith Barney
Intermediate Maturity California Municipals Fund, Smith Barney Intermediate
Maturity New York Municipals Fund, Smith Barney Large Capitalization Growth
Fund, Smith Barney S&P 500 Index Fund, Smith Barney Mid Cap Blend Fund, Smith
Barney Managed Governments Fund Inc., Smith Barney Managed Municipals Fund Inc.,
Smith Barney Massachusetts Municipals Fund, Cash Portfolio, Government
Portfolio, Retirement Portfolio, California Money Market Portfolio, Florida
Portfolio, Georgia Portfolio, Limited Term Portfolio, New York Money Market
Portfolio, New York Portfolio, Pennsylvania Portfolio, Smith Barney Municipal
Money Market Fund, Inc., Smith Barney Natural Resources Fund Inc., Smith Barney
New Jersey Municipals Fund Inc., Smith Barney Oregon Municipals Fund, Zeros Plus
Emerging Growth Series 2000, Smith Barney Security and Growth Fund, Smith Barney
Small Cap Blend Fund, Inc., Smith Barney Telecommunications Income Fund, Income
and Growth Portfolio, Reserve Account Portfolio, U.S. Government/High Quality
Securities Portfolio, Emerging Markets Portfolio, European Portfolio, Global
Government Bond Portfolio, International Balanced Portfolio, International
Equity Portfolio, Pacific Portfolio, AIM Capital Appreciation Portfolio,
Alliance Growth Portfolio, GT Global Strategic Income Portfolio, MFS Total
Return Portfolio, Putnam Diversified Income Portfolio, Smith Barney High Income
Portfolio, Smith Barney Large Cap Value Portfolio, Smith Barney International
Equity Portfolio, Smith Barney Large Capitalization Growth Portfolio, Smith
Barney Money Market Portfolio, Smith Barney Pacific Basin Portfolio, TBC Managed
Income Portfolio, Van Kampen American Capital Enterprise Portfolio, Centurion
Tax-Managed U.S. Equity Fund, Centurion Tax-Managed International Equity Fund,
Centurion U.S. Protection Fund, Centurion International Protection Fund, Global
High-Yield Bond Fund, International Equity Fund, Emerging Opportunities Fund,
Core Equity Fund, Long-Term Bond Fund, Global Dimensions Fund L.P., Citicorp
Private Equity L.P., AIM V.I. Capital Appreciation Fund, AIM V.I. Government
Series Fund, AIM V.I. Growth Fund, AIM V.I. International Equity Fund, AIM V.I.
Value Fund, Fidelity VIP Growth Portfolio, Fidelity VIP High Income Portfolio,
Fidelity VIP Equity Income Portfolio, Fidelity VIP Overseas Portfolio, Fidelity
VIP II Contrafund Portfolio, Fidelity VIP II Index 500 Portfolio, MFS World
Government Series, MFS Money Market Series, MFS Bond Series, MFS Total Return
Series, MFS Research Series, MFS Emerging Growth Series, Salomon Brothers
Institutional Money Market Fund, Salomon Brothers Cash Management Fund, Salomon
Brothers New York Municipal Money Market Fund, Salomon Brothers National
Intermediate Municipal Fund, Salomon Brothers U.S. Government Income Fund,
Salomon
<PAGE> 34
Brothers High Yield Bond Fund, Salomon Brothers Strategic Bond Fund, Salomon
Brothers Total Return Fund, Salomon Brothers Asia Growth Fund, Salomon Brothers
Capital Fund Inc, Salomon Brothers Investors Fund Inc, Salomon Brothers
Opportunity Fund Inc, Salomon Brothers Institutional High Yield Bond Fund,
Salomon Brothers Institutional Emerging Markets Debt Fund, Salomon Brothers
Variable Investors Fund, Salomon Brothers Variable Capital Fund, Salomon
Brothers Variable Total Return Fund, Salomon Brothers Variable High Yield Bond
Fund, Salomon Brothers Variable Strategic Bond Fund, Salomon Brothers Variable
U.S. Government Income Fund, and Salomon Brothers Variable Asia Growth Fund.
(b) The information required by this Item 27 with respect to each director and
officer of CFBDS is incorporated by reference to Schedule A of Form BD filed by
CFBDS pursuant to the Securities and Exchange Act of 1934 (File No. 8-32417).
(c) Not Applicable
Item 30. Location of Accounts and Records
(1) The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
The undersigned Registrant hereby undertakes:
(a) To file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial statements
in the registration statement are never more than sixteen months old for
so long as payments under the variable annuity contracts may be accepted;
(b) To include either (1) as part of any application to purchase a contract
offered by the prospectus, a space that an applicant can check to request
a Statement of Additional Information, or (2) a post card or similar
written communication affixed to or included in the prospectus that the
applicant can remove to send for a Statement of Additional Information;
and
(c) To deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly upon
written or oral request.
The Company hereby represents:
(a). That the aggregate charges under the Contracts of the Registrant described
herein are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the Company.
<PAGE> 35
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this amendment to this registration statement to
be signed on its behalf, in the City of Hartford, and State of Connecticut, on
this 28th day of September 1999.
THE TRAVELERS SEPARATE ACCOUNT TEN FOR VARIABLE ANNUITIES
(Registrant)
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Depositor)
By: *JAY S. BENET
----------------------------------------------
Jay S. Benet
Senior Vice President, Chief Financial Officer
Chief Accounting Officer and Controller
As required by the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities indicated on the 28th day of
September 1999.
<TABLE>
<S> <C>
*MICHAEL A. CARPENTER Director and Chairman of the Board
- ----------------------------------
(Michael A. Carpenter)
*J. ERIC DANIELS Director, President and Chief Executive Officer
- ----------------------------------
(J. Eric Daniels)
*JAY S. BENET Director, Senior Vice President, Chief
- ---------------------------------- Financial Officer, Chief Accounting Officer
(Jay S. Benet) and Controller
*GEORGE C. KOKULIS Director and Executive Vice President
- ----------------------------------
(George C. Kokulis
*ROBERT I. LIPP Director
- ----------------------------------
(Robert I. Lipp)
*KATHERINE M. SULLIVAN Director and Senior Vice President
- ----------------------------------
(Katherine M. Sullivan)
*MARC P. WEILL Director and Senior Vice President
- ----------------------------------
(Marc P. Weill)
</TABLE>
*By: /s/Ernest J. Wright, Attorney-in-Fact
