<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
_________ ___________
_______________________________
Commission file number 33-33691
_______________________________
THE TRAVELERS INSURANCE COMPANY
(exact name of registrant as specified in its charter)
CONNECTICUT 06-0566090
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
(Address of principal executive offices) (Zip Code)
(860) 277-0111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------------- ---------------
As of November 13, 1995, there were outstanding 40,000,000 shares of common
stock, par value $2.50, of the Registrant, all of which were owned by The
Travelers Insurance Group Inc., a subsidiary of Travelers Group Inc.
REDUCED DISCLOSURE FORMAT
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format.
<PAGE> 2
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1995
Table of Contents
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statement of Operations and Retained Earnings for the
Quarter and Nine Months Ended September 30, 1995 and 1994 (unaudited) . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheet as of September 30, 1995 (unaudited) and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statement of Cash Flows for the
Nine Months Ended September 30, 1995 and 1994 (unaudited) . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
2
<PAGE> 3
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
AND RETAINED EARNINGS (Unaudited)
(in millions)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES
Premiums $ 384 $ 372 $1,157 $1,114
Net investment income 463 400 1,368 1,175
Realized investment gains 45 7 33 23
Other revenues 47 38 164 125
------- ------ ------ ------
939 817 2,722 2,437
------- ------ ------ ------
BENEFITS AND EXPENSES
Current and future insurance benefits 318 300 919 888
Interest credited to contractholders 234 208 732 660
Amortization of deferred acquisition costs
and value of insurance in force 74 63 220 196
General and administrative expenses 91 85 275 254
------- ------ ------ ------
717 656 2,146 1,998
------- ------ ------ ------
Income from continuing operations
before federal income taxes 222 161 576 439
Federal income taxes 78 56 200 153
------- ------ ------ ------
Income from continuing operations 144 105 376 286
Discontinued operations, net of income taxes
Income from operations 23 41 62 104
Gain on disposition -- -- 20 --
------- ------ ------ ------
Income from discontinued operations 23 41 82 104
------- ------ ------ ------
Net income 167 146 458 390
Retained earnings beginning of period 1,853 1,261 1,562 1,017
------- ------ ------ ------
Retained earnings end of period $2,020 $1,407 $2,020 $1,407
======= ====== ====== ======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Investments, including real estate held for sale $ 26,642 $ 27,495
Separate and variable accounts 6,471 5,160
Reinsurance recoverable 4,382 2,915
Other assets 4,233 4,965
-------- --------
Total assets $ 41,728 $ 40,535
======== ========
LIABILITIES
Contractholder funds $ 14,971 $ 16,354
Benefit and other insurance reserves 12,478 12,702
Separate and variable accounts 6,439 5,128
Other liabilities 2,233 1,997
-------- --------
Total liabilities 36,121 36,181
-------- --------
SHAREHOLDER'S EQUITY
Capital stock, par value $2.50; 40 million
shares authorized, issued and outstanding 100 100
Additional paid-in capital 3,132 3,452
Unrealized investment gains (losses), net of taxes 355 (760)
Retained earnings 2,020 1,562
-------- --------
Total shareholder's equity 5,607 4,354
-------- --------
Total liabilities and shareholder's equity $ 41,728 $ 40,535
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
INCREASE (DECREASE) IN CASH
(in millions)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net cash provided by operating activities $ 447 $ 106
Net cash provided by (used in) discontinued operations (574) 249
------- -------
Net cash provided by (used in) operations (127) 355
------- -------
Cash flows from investing activities
Investment repayments
Fixed maturities 1,527 2,042
Mortgage loans 375 1,059
Proceeds from sales of investments, including real estate held for sale
Fixed maturities 5,189 946
Equity securities 312 266
Mortgage loans 446 395
Real estate held for sale 202 641
Investments in
Fixed maturities (7,508) (3,552)
Equity securities (253) (271)
Mortgage loans (107) (68)
Policy loans, net (325) (200)
Short-term securities, (purchases) sales, net 119 (552)
Other investments, net (216) 12
Securities transactions in course of settlement 295 334
Net cash provided by (used in) investing activities of
discontinued operations 778 (264)
------- -------
Net cash provided by investing activities 834 788
------- -------
Cash flows from financing activities
Issuance (redemption) of short-term debt, net (19) 105
Contractholder fund deposits 2,022 1,657
Contractholder fund withdrawals (2,746) (2,843)
Contributions to parent company -- (23)
Other -- (2)
Net cash flows provided by financing activities of discontinued
operations -- 8
------- -------
Net cash used in financing activities (743) (1,098)
------- -------
Net increase (decrease) in cash (36) 45
Cash at beginning of period 102 50
------- -------
Cash at end of period $ 66 $ 95
======= =======
Supplemental disclosure of cash flow information
Interest paid $ 3 $ 1
======= =======
Income taxes paid (refunded) $ 44 $ (24)
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1995
1. General
The interim financial statements of The Travelers Insurance Company (an
indirect, wholly owned subsidiary of Travelers Group Inc.) and Subsidiaries
(the Company) have been prepared in conformity with generally accepted
accounting principles (GAAP) and are unaudited. They reflect all adjustments
(none of which were other than normal recurring adjustments) necessary, in
the opinion of management, for a fair statement of results for the periods
reported. The accompanying condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and related
notes included in the Company's Form 10-K for the year ended December 31,
1994.
Certain financial information that is normally included in financial
statements prepared in accordance with GAAP but is not required for interim
reporting purposes has been condensed or omitted.
As more fully described in Note 3, all of the operations comprising the
Managed Care and Employee Benefits Operations (MCEBO) segment are presented
as discontinued operations and, accordingly, prior year amounts have been
restated.
In September 1995, Travelers Group Inc. (Travelers) made a pro rata
distribution to Travelers' stockholders of shares of Class A Common Stock,
$.01 par value per share, of Transport Holdings Inc., which at the time was a
wholly owned subsidiary of Travelers and was the indirect owner of the
business of Transport Life Insurance Company. Immediately prior to this
distribution, the Company dividended Transport Life Insurance Company, an
indirect, wholly owned subsidiary of the Company, to its parent.
2. Changes in Accounting Principles
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," and Statement of Financial Accounting Standards No. 118, "Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosures,"
which describe how impaired loans should be measured when determining the
amount of a loan loss accrual. These statements amended existing guidance on
the measurement of restructured loans in a troubled debt restructuring
involving a modification of terms. The adoption of these standards did not
have a material impact on the Company's financial condition, results of
operations or liquidity.
6
<PAGE> 7
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
3. Dispositions
Sale of subsidiaries
In December 1994, the Company and its affiliates sold its group dental
insurance business to Metropolitan Life Insurance Company (MetLife) and on
January 3, 1995, the Company and its affiliates sold its group life and
related businesses to MetLife for $350 million, and the Company recognized,
in the first quarter of 1995, an after-tax gain of $20 million ($31 million
pretax).
On January 3, 1995, the Company and MetLife, and certain of their affiliates,
formed The MetraHealth Companies, Inc. (MetraHealth) joint venture by
contributing their medical businesses to MetraHealth, in exchange for shares
of common stock of MetraHealth. No gain was recognized upon the formation of
the joint venture, at which time the Company owned 42.6% of the outstanding
capital stock of MetraHealth, the Company's parent, the Travelers Insurance
Group Inc. (TIG), owned 7.4%, and the other 50% was owned by MetLife and its
affiliates. In March 1995, MetraHealth acquired HealthSpring, Inc., for
common stock of MetraHealth, resulting in a reduction in the ownership
interest of the Company to 41.10%, TIG to 7.15%, and MetLife to 48.25%.
In connection with the formation of the joint venture, the transfer of the
fee-based medical business (Administrative Services Only) and other
noninsurance business to MetraHealth was completed on January 3, 1995. As the
medical insurance business of the Company comes due for renewal the risks are
transferred to MetraHealth. In the interim the related operating results for
this medical insurance business are being reported by the Company.
On October 2, 1995, the Company and its affiliates completed the sale of its
ownership in MetraHealth to United HealthCare Corporation. Gross proceeds to
the Company were $708 million in cash, and could increase by as much as $144
million if a contingency payment based on 1995 results is made. The gain to
the Company, not including the contingency payment, will be approximately
$100 million after-tax and will be recognized in the fourth quarter of 1995.
Discontinued operations
All of the businesses sold to MetLife or contributed to MetraHealth were
included in the Company's MCEBO segment in 1994, and in 1995 the Company's
results reflect the medical insurance business not yet transferred, plus its
equity interest in the earnings of MetraHealth. These operations have been
accounted for as discontinued operations. Revenues from discontinued
operations for the nine months ended September 30, 1995 and 1994 amounted to
$961 million and $2.6 billion, respectively, and for the three months ended
September 30, 1995 and 1994 amounted to $220 million and $847 million,
respectively. The assets and liabilities of the discontinued operations have
not been segregated in the Condensed Consolidated Balance Sheet as of
September 30, 1995 and December 31, 1994. The assets and liabilities of the
discontinued operations consist primarily of investments, the equity interest
in MetraHealth and insurance-related assets and liabilities. At September 30,
1995 these assets amounted to $2.7 billion and these liabilities amounted to
$2.3 billion. At December 31, 1994 these assets amounted to $3.4 billion and
these liabilities amounted to $3.2 billion.
7
<PAGE> 8
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
4. Capital and Debt
The Company issues commercial paper directly to investors and had $55 million
and $74 million outstanding at September 30, 1995 and December 31, 1994,
respectively. This is included in other liabilities in the condensed
consolidated balance sheet. The Company maintains unused credit availability
under bank lines of credit at least equal to the amount of the outstanding
commercial paper.
Travelers, Commercial Credit Company (CCC) (an indirect wholly owned
subsidiary of Travelers) and the Company have an agreement with a syndicate
of banks to provide $1.0 billion of revolving credit, to be allocated to any
of Travelers, CCC or the Company. The Company's participation in this
agreement is limited to $250 million. The revolving credit facility consists
of a five-year revolving credit facility which expires in 1999. At September
30, 1995, $125 million was allocated to the Company. Under this facility the
Company is required to maintain certain minimum equity and risk-based capital
levels. At September 30, 1995, the Company was in compliance with these
provisions.
The decrease of $320 million in additional paid-in capital during 1995 is due
primarily to the dividend of Transport Life Insurance Company to its parent
in September 1995 (see Note 1).
Under Connecticut law the statutory capital and surplus of the Company, which
amounted to $2.1 billion at December 31, 1994, is not available in 1995 for
dividends to its parent without prior approval of the Connecticut Insurance
Department. Dividend payments to the Company from its insurance subsidiaries
are subject to similar restrictions and statutory surplus of the subsidiaries
is not available in 1995 for dividends to the Company without prior approval
of insurance regulatory authorities.
5. Commitments and Contingencies
In April 1989 a lawsuit was filed on behalf of the Federal government
alleging the Company improperly handled health benefit claims for individuals
who are actively employed and eligible for Medicare Coverage. In September
1995, the Company reached a settlement with respect to this action. The
agreement resolves all claims against Travelers Group Inc. and certain of its
subsidiaries. The Company anticipates that the action will be dismissed in
accordance with the settlement agreement before year end 1995. This
transaction had no impact on 1995 earnings.
The Company is a defendant or co-defendant in various litigation matters.
Although there can be no assurances, as of September 30, 1995, 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.
8
<PAGE> 9
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's narrative analysis of the results of operations is
presented in lieu of Management's Discussion and Analysis of Financial Condition
and Results of Operations, pursuant to General Instruction H(2)(a) of Form 10-Q.
CONSOLIDATED OVERVIEW
<TABLE>
<CAPTION>
For the nine months ended September 30, 1995 1994
- --------------------------------------- -------- --------
(in millions)
- -------------
<S> <C> <C>
Revenues $ 2,722 $ 2,437
======== ========
Income from continuing operations $ 376 $ 286
Income from discontinued operations 82 104
-------- --------
Net income $ 458 $ 390
======== ========
</TABLE>
The Travelers Insurance Company and its subsidiaries (the Company) write
principally individual life insurance, annuities, accident and health insurance,
and pension programs. The Company principally operates through one major
business segment, Life and Annuities, which offers individual life, long-term
care, annuities and investment products to individuals and small businesses, and
investment products to employer-sponsored retirement and savings plans. The
Company's Corporate and Other Operations segment manages the investment
portfolio of the Company.
Income from continuing operations for the first nine months of 1995 increased
$90 million when compared to the first nine months of 1994. The principal
reasons for this increase were higher retained investment margins, asset growth
and improved productivity.
Premiums from continuing operations of $1,157 million for the nine months ended
September 30, 1995 increased $43 million as compared to premiums from continuing
operations of $1,114 million for the nine months ended September 30, 1994,
reflecting an increase in term life insurance premiums.
Pretax realized investment gains from continuing operations were $33 million for
the first nine months of 1995 as compared to pretax realized investment gains
from continuing operations of $23 million for the comparable period in 1994.
Other revenues from continuing operations include mortality, surrender and
administrative charges on universal life and investment contracts, net of
related benefits and expenses.
At September 30, 1995, the Company had mortgage loans and real estate
investments (including joint ventures) totaling $4.6 billion compared to $5.4
billion at December 31, 1994. Underperforming mortgage loans and real estate
accounted for $627 million of the total at September 30, 1995, down from $915
million at December 31, 1994. Underperforming assets include delinquent mortgage
loans, loans in the process of foreclosure, joint ventures, loans modified at
interest rates below market and real estate held for sale. The Company adopted a
strategy to accelerate the disposition of its mortgage loans and real estate
assets in 1993. The sale of underperforming assets has enabled the Company to
reinvest and obtain current market yields.
9
<PAGE> 10
DISCONTINUED OPERATIONS
On January 3, 1995, the Company and its affiliates completed the sale of its
group life and related businesses to Metropolitan Life Insurance Company
(MetLife). The Company agreed to cede to MetLife 100% of its risks in the
businesses sold on an indemnity reinsurance basis, effective January 1, 1995.
Also on January 3, 1995, the Company and MetLife, including certain of their
affiliates, each contributed its medical businesses to The MetraHealth
Companies, Inc. (MetraHealth), a newly formed joint venture, in exchange for
common stock of MetraHealth. In March 1995, MetraHealth acquired HealthSpring,
Inc., for common stock of MetraHealth.
On October 2, 1995, the Company and its parent, The Travelers Insurance Group
Inc. (TIGI), disposed of their interest in MetraHealth through the merger of
MetraHealth and an acquisition subsidiary of United HealthCare Corporation
(United). MetraHealth was the surviving corporation in the merger. The Company
and TIGI collectively owned 48.25% of MetraHealth's common stock, and received a
total of $831 million in connection with the transaction. This amount includes a
dividend paid by MetraHealth and amounts paid by a subsidiary of Metropolitan
Life Insurance Company (MetLife) for the sale to MetLife of the Company and
TIGI's share of certain additional amounts payable under the merger agreement
based on 1996 and 1997 earnings. The Company and TIGI are also entitled to
receive up to an additional $169 million, based on "Company Earnings" (as
defined in the merger agreement) for 1995. The Company's share of the proceeds
is $708 million, and it is entitled to receive up to an additional $144 million,
based on 1995 Company Earnings. The sale will generate an after-tax gain of
approximately $100 million to be recorded in the fourth quarter of 1995.
As discussed in Note 3 of Notes to Condensed Consolidated Financial Statements,
all of the businesses sold to MetLife or contributed to MetraHealth were
included in the Company's Managed Care and Employee Benefits Operations (MCEBO)
segment in 1994. MCEBO marketed group life and health insurance, managed health
care programs and administrative services associated with employee benefit
plans. In 1995, the Company's results reflect the medical insurance business not
yet transferred, plus its equity interest in the earnings of MetraHealth. These
operations have been accounted for as discontinued operations.
LIFE AND ANNUITIES
<TABLE>
<CAPTION>
For the nine months ended September 30, 1995 1994
- --------------------------------------- -------- --------
(in millions)
- -------------
<S> <C> <C>
Revenues $ 2,712 $ 2,434
======== ========
Net income $ 379 $ 287
======== ========
</TABLE>
Life and Annuities net income increased 32% to $379 million for the nine months
ended September 30, 1995 from $287 million in the 1994 period. Higher retained
investment margins, asset growth and improved productivity propelled the nine
month's earnings growth. Investment margins continue to be helped by the
reinvestment of proceeds from real estate sales. Primerica Life Insurance
Company (Primerica Life) earnings increased over the comparable 1994 period
reflecting continued growth in life insurance in force as well as improved
mortality results compared to the first nine months of 1994.
10
<PAGE> 11
Individual annuity production was strong during the first nine months of 1995,
compared to a year ago, primarily reflecting increased sales of variable
annuities. Sales continue to be aided by the success of Vintage, the variable
annuity product distributed by Smith Barney Financial Consultants, which was
launched in June 1994. Vintage Life and Travelers Target Maturity, the first of
several new products planned for Smith Barney, were introduced in September
1995. Net written premiums and deposits for individual annuities during the
first nine months of 1995 totaled $1,180 million compared to $944 million in the
comparable 1994 period, bringing total policyholder account balances and benefit
reserves to $12.3 billion at September 30, 1995 versus $10.7 billion at
September 30, 1994. Annuity sales activity has been helped by the ratings
upgrades that accompanied the merger with Primerica.
In the group annuity business, a management decision not to renew low margin
guaranteed investment contracts (GICs) written in prior years accounted for a
reduction in policyholder account balances and reserves from $12.0 billion at
September 30, 1994 to $11.0 billion at September 30, 1995. Net written premiums
and deposits for the first nine months of 1995 were $709 million (excluding
intercompany items) compared to $640 million in last year's period reflecting an
increase in the sale of GICs that are being selectively underwritten in 1995.
During the first nine months of 1995, the Life and Annuities operations
(excluding Primerica Life discussed below) issued $4.5 billion of face amount of
individual life insurance, down from $7.2 billion during the first nine months
of 1994, bringing total life insurance in force to $48.9 billion. The reduction
in face amount issued reflects intense competition in the independent agent
segment of the term insurance market. Individual life insurance net written
premiums and deposits totaled $181 million during the first nine months of 1995
compared to $197 million in the first nine months of 1994, reflecting this
competition and the purchase of additional reinsurance coverage in 1995.
Net written premiums for individual accident and health products, primarily
long-term care, increased to $242 million for the nine months ended September
30, 1995, from $240 million for the nine months ended September 30, 1994.
Primerica Life issued $39.5 billion in face amount of new term life insurance
during the first nine months of 1995, down from $42.4 billion in face amount
during the first nine months of 1994.
In September 1995, Travelers Group Inc. (Travelers) made a pro rata
distribution to Travelers' stockholders of shares of Class A Common Stock, $.01
par value per share, of Transport Holdings Inc., which at the time was a wholly
owned subsidiary of Travelers and was the indirect owner of the business of
Transport Life Insurance Company. Immediately prior to this distribution, the
Company dividended Transport Life Insurance Company, an indirect, wholly owned
subsidiary of the Company, to its parent.
CORPORATE AND OTHER OPERATIONS
<TABLE>
<CAPTION>
For the nine months ended September 30, 1995 1994
- --------------------------------------- ------ -----
(in millions)
- -------------
<S> <C> <C>
Revenues $ 10 $ 3
===== =====
Net income (loss) $ (3) $ (1)
===== =====
</TABLE>
11
<PAGE> 12
DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
For the nine months ended September 30, 1995 1994
- --------------------------------------- ---- ----
(in millions)
- -------------
<S> <C> <C>
Income from operations of discontinued operations $ 62 $ 104
Gain on disposition 20 -
------ ------
Income from discontinued operations $ 82 $ 104
====== ======
</TABLE>
In 1995, income from operations of discontinued operations of $62 million
includes the results of the medical insurance business not yet transferred plus
the Company's equity interest in the earnings of MetraHealth. The after-tax gain
on disposition of $20 million represents the gain from the sale in January 1995
of the group life and related businesses to MetLife.
INSURANCE REGULATIONS
Risk-based capital requirements are used as early warning tools by the National
Association of Insurance Commissioners and the states to identify companies that
merit further regulatory action. At September 30, 1995, the Company and its
insurance subsidiaries had adjusted capital in excess of amounts requiring any
regulatory action.
The Company is subject to various regulatory restrictions that limit the maximum
amount of dividends available to its parent without prior approval of insurance
regulatory authorities in the state of domicile. No statutory surplus is
available in 1995 for dividends to the Company's shareholder without prior
approval of the Connecticut Insurance Department.
Dividend payments to the Company from its insurance subsidiaries are subject to
similar restrictions and statutory surplus of the subsidiaries is not available
in 1995 for dividends to the Company without prior approval of insurance
regulatory authorities.
ACCOUNTING STANDARDS NOT YET ADOPTED
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for Long-Lived Assets and for
Long-Lived Assets to be Disposed Of (FAS 121). This Statement establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of. This Statement requires write down to fair value when long-lived
assets to be held and used are impaired. The Statement also requires long-lived
assets to be disposed of (e.g., real estate held for sale) to be carried at the
lower of cost or fair value less cost to sell and does not allow such assets to
be depreciated. This Statement will be effective for 1996 financial statements,
although earlier adoption is permissible. The Company has not yet determined
when it will adopt FAS 121, however the impact is not expected to be material to
its results of operations, financial condition or liquidity.
12
<PAGE> 13
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). This statement addresses alternative accounting
treatments for stock-based compensation, such as stock options and restricted
stock. FAS 123 permits either expensing the value of stock-based compensation
over the period earned or disclosing in the financial statement footnotes the
pro forma impact to net income as if the value of stock-based compensation
awards had been expensed. The value of awards would be measured at the grant
date based upon estimated fair value, using option pricing models. The
requirements of this statement will be effective for 1996 financial statements,
although earlier adoption is permissible if an entity elects to expense the
cost of stock-based compensation. The Company along with affiliated companies
participates in stock option and incentive plans sponsored by the parent. The
Company is currently evaluating the disclosure requirements and expense
recognition alternatives addressed by this statement.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In April 1989 a lawsuit was filed on behalf of the Federal government alleging
the Company improperly handled health benefit claims for individuals who are
actively employed and eligible for Medicare Coverage. In September 1995, the
Company reached a settlement with respect to this action. The agreement resolves
all claims against Travelers Group Inc. and certain of its subsidiaries. The
Company anticipates that the action will be dismissed in accordance with the
settlement agreement before year end 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description Filing Method
- ------- ----------- -------------
<S> <C> <C>
2. Agreement and Plan of Merger dated June 25, 1995, by
and among United HealthCare Corporation (United),
Montana Acquisition Inc., The MetraHealth Companies,
Inc. (MetraHealth), The Travelers Insurance Group Inc.,
The Travelers Insurance Company (the Company), MetLife
HealthCare Holdings, Inc. and Metropolitan Life
Insurance Company, incorporated by reference to
Exhibit 2 to the Registration Statement on Form S-2,
as amended (File No. 33-58677), of the Company and The
Travelers Life and Annuity Company.
3. Articles of Incorporation and By-laws
a. Charter of the Company, as effective
October 19, 1994, incorporated by
reference to Exhibit 3.01 to the
Company's quarterly report on Form
10-Q for the quarter ended September
30, 1994 (File No. 33-33691) (the
"Company's September 30, 1994 10-Q").
b. By-laws of the Company as effective
October 20, 1994, incorporated by
reference to Exhibit 3.02 to the
Company's September 30, 1994 10-Q.
27. Financial Data Schedule Electronic
</TABLE>
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed during the quarter ended September 30,
1995; however, on October 12, 1995, the Company filed a Current Report on Form
8-K, dated October 2, 1995, reporting under Item 2 thereof the disposition of
its interest in MetraHealth through the merger of MetraHealth and an acquisition
subsidiary of United.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE TRAVELERS INSURANCE COMPANY
-------------------------------
(Registrant)
Date November 13, 1995 /s/ Jay S. Fishman
---------------------- -------------------------------
Jay S. Fishman
Vice Chairman and
Chief Financial Officer
Date November 13, 1995 /s/ Christine B. Mead
---------------------- -------------------------------
Christine B. Mead
Vice President - Finance
and Controller
15
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1995 financial statements of The Travelers Insurance Company and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000733076
<NAME> THE TRAVELERS INSURANCE COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
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<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 0
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<EQUITIES> 0
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<REAL-ESTATE> 0
<TOTAL-INVEST> 26,642
<CASH> 66
<RECOVER-REINSURE> 4,382
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<TOTAL-ASSETS> 41,728
<POLICY-LOSSES> 12,478
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<COMMON> 100
0
0
<OTHER-SE> 5,507
<TOTAL-LIABILITY-AND-EQUITY> 41,728
1,157
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<UNDERWRITING-AMORTIZATION> 220
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<EXTRAORDINARY> 0
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</TABLE>
