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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 25, 1995
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THE TRAVELERS INSURANCE COMPANY
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(Exact name of registrant as specified in its charter)
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Connecticut 33-33691 06-0566090
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
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One Tower Square, Hartford, Connecticut 06183
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 277-0111
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Item 5. Other Events
On June 25, 1995, The Travelers Insurance Group Inc. ("TIGI") and The Travelers
Insurance Company (the "Company"), both wholly owned subsidiaries of Travelers
Group Inc. ("Travelers"), entered into a definitive agreement with MetLife
HealthCare Holdings, Inc. ("MHH"), a subsidiary of Metropolitan Life Insurance
Company ("MetLife"), The MetraHealth Companies, Inc. ("Metra") and United
HealthCare Corporation ("United") and its acquisition subsidiary for the
acquisition by merger of Metra by United. The Travelers entities and MHH each
own 48.25% of Metra.
The terms of the transaction call for United to pay initial consideration to the
stockholders of Metra of $1.65 billion, of which $1.15 billion is to be paid in
cash and $500 million is to be paid in the form of convertible preferred stock
of United. In addition, United will pay up to $350 million to the Metra
stockholders, based on the operating results of Metra for 1995. In the event
that Company Earnings (as that term is defined in the merger agreement) of Metra
for 1995 are at least $190 million, the stockholders of Metra will be entitled
to receive the full contingency payment. If Company Earnings for 1995 are less
than $190 million, the contingency payment will be reduced ratably, and no
payment will be due if such earnings are $155 million or less. The merger
agreement provides that United will also pay two additional payments to the
stockholders of Metra of up to $175 million each based on the earnings of the
combined Metra and United for 1996 and 1997. In a related agreement, the
Travelers entities have agreed to sell their right to the 1996 and 1997
additional payments to the MetLife entities for $35 million.
According to the terms of the merger agreement, the Travelers entities have
elected to receive all cash for their portion of the initial consideration, and
accordingly will receive a total of $831 million as a result of the merger and
the related sale to the MetLife entities of the Travelers entities' share of the
1996 and 1997 additional payments. In addition, the Travelers entities will
receive up to $169 million if a contingency payment for 1995 is made. Of these
amounts, the Company will be entitled to receive approximately $708 million of
the initial consideration and $144 million of the contingent consideration, with
the balance to be received by TIGI.
The Boards of Directors of the Travelers entities and of MetLife and United have
approved the merger. The merger is subject to customary regulatory approvals,
including approvals from a number of state insurance commissions.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
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Exhibit No. Description
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99.01 Unaudited Pro Forma Consolidated Financial
Information.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 30, 1995 THE TRAVELERS INSURANCE COMPANY
(Registrant)
By: /s/Christine B. Mead
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Christine B. Mead
Vice President - Finance and Controller
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EXHIBIT INDEX
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Exhibit No. Description
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99.01 Unaudited Pro Forma Consolidated Financial
Information.
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Exhibit 99.01
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
In order to update the information to be included in certain registration
statements that it has filed with the Securities and Exchange Commission, the
Company is including in this Current Report on Form 8-K certain pro forma
financial information related to the previously reported sale of its group life
and related businesses to MetLife, the formation of Metra, the joint venture of
the health care benefits businesses of the Company and MetLife, the sale of
Metra and the dividend of Transport Life Insurance Company (Transport Life) to
the Company's parent, and ultimately to the Travelers shareholders.
The following unaudited pro forma financial statements of The Travelers
Insurance Company and its consolidated subsidiaries are collectively included in
this Current Report on Form 8-K:
Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1995
(Unaudited);
Pro Forma Consolidated Statements of Operations for the three months ended
March 31, 1995 and the year ended December 31, 1994 (Unaudited);
and Notes to Pro Forma Consolidated Financial Statements (Unaudited).
Such unaudited pro forma financial statements give effect to the transactions
described below and other matters as more fully described in the accompanying
notes. Except for the sale of Metra and the dividend of Transport Life, these
transactions have previously been reported by the Company.
Sale of group life, transfer of medical business to Metra
and subsequent sale of investment in Metra
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In December 1994 the Company sold its group dental insurance business to MetLife
for $52 million, and on January 3, 1995 the Company completed the sale of its
group life business and the remaining related non-medical group insurance
business (Life) to MetLife for $350 million. The assets transferred included
customer lists, books and records, and furniture and equipment. In connection
with the sale, the Company agreed to cede 100% of its risks in the Life business
to MetLife on an indemnity reinsurance basis, effective January 1, 1995. In
connection with the reinsurance transaction, the Company transferred assets with
a fair market value of approximately $1.5 billion to MetLife, estimated to equal
the statutory reserves and other liabilities transferred.
On January 3, 1995, the Company and MetLife, and certain of their affiliates,
contributed their health care benefits businesses (Medical) to Metra or its
subsidiaries, in exchange for shares of common stock of Metra. The assets
transferred included cash, fixed assets, customer lists, books and records,
certain trademarks and other assets used exclusively or primarily in the health
care benefits businesses. The Company also contributed all of the capital stock
of the Company's wholly owned subsidiary, The Travelers Employee Benefits
Company, to Metra. The Company's total contribution amounted to approximately
$364 million. No gain was recognized upon the formation of the joint venture. In
March 1995, Metra acquired HealthSpring, Inc. for common stock of Metra. This
acquisition resulted in a reduction in the ownership percentage of the Company
in the Metra venture to 41.1%. The Company and its affiliates, which together
own 48.25% of Metra, are equal partners in the joint venture with MetLife and
its affiliates.
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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 Metra was completed on January 3, 1995. As the medical insurance
business of the Company and its affiliates comes due for renewal, and after
obtaining regulatory approvals, the risks will be transferred to Metra. In the
interim, the related operating results for this medical insurance business (run
off) are being reported in the Company's consolidated financial statements.
On June 25, 1995 Travelers agreed to United Health Care Corporation's (United)
proposed acquisition of Metra. The terms of the transaction call for United to
pay a total consideration to Metra's owners of $1.65 billion, $1.15 billion in
cash and $0.5 billion in convertible preferred stock. In addition, United will
pay up to $350 million to these owners if certain 1995 operating results are
achieved and other contingency payments. According to the terms, the Company
will receive a total of $708 million in cash, and up to an additional $144
million if a contingency payment for 1995 (the only year in which the Company
will participate in such payments) is made.
Transport Life spinoff
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In June 1995, the Board of Directors of Travelers approved a pro rata
distribution to Travelers' stockholders of shares of Class A Common Stock, $.01
par value per share, of Transport Holdings Inc., currently a wholly owned
subsidiary of Travelers and which, at the time of the distribution, will be the
indirect owner of the business of Transport Life. Immediately prior to this
distribution, Transport Life, an indirect, wholly owned subsidiary of the
Company, will be dividended by the Company to its parent.
Assumptions
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The following unaudited pro forma condensed consolidated statements of income of
the Company for the three months ended March 31, 1995 and year ended December
31, 1994, present consolidated operating results for the Company as if the
transactions described above had occurred at the beginning of each period
presented. The accompanying unaudited pro forma condensed consolidated statement
of financial position as of March 31, 1995 gives effect to the above
transactions as if they occurred as of March 31, 1995. The unaudited pro forma
consolidated financial statements are presented for informational purposes only
and should not be construed to be indicative of the actual financial position
and results of operations of the Company after giving effect to the transactions
described above. The unaudited pro forma consolidated financial information
should be read in conjunction with the accompanying notes thereto; the separate
historical financial statements of the Company as of and for the three months
ended March 31, 1995, and for the year ended December 31, 1994 which are
contained in the Company's Form 10-Q for the quarterly period ended March 31,
1995 and in its Annual Report on Form 10-K for the fiscal year ended December
31, 1994, respectively.
The pro forma adjustments and pro forma amounts are provided for informational
purposes only and if each transaction is consummated, the Company's financial
statements will reflect the effects of each transaction only from the date such
transaction occurs. Although the final amounts will differ, the pro forma
condensed financial information reflects management's best estimate based on
currently available information.
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THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1995
(Unaudited)
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Pro Forma
Less: Pro Forma before Transport Less: Pro
(in millions) Historical Metra/Runoff Adjustments Life Spinoff Transport Life Forma
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ASSETS
Bonds, available for sale $16,422 $ (499) $15,923 $ (572) $ 15,351
Mortgage loans 4,738 (4) 4,734 (18) 4,716
Other investments 5,460 (581) $ 708 5,587 (151) 5,436
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Total investments 26,620 (1,084) 708 26,244 (741) 25,503
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Separate and variable accounts 5,573 5,573 5,573
Reinsurance recoverable 4,425 (5) 4,420 (25) 4,395
Other assets 4,944 (829) 3 4,118 (125) 3,993
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Total assets $41,562 $(1,918) $ 711 $40,355 $ (891) 39,464
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LIABILITIES
Contractholder funds $15,511 $ (419) $15,092 $ (3) 15,089
Benefit and other insurance reserves 13,189 (445) 12,744 (430) 12,314
Separate and variable accounts 5,545 5,545 5,545
Other liabilities 2,312 (711) $ 113 1,714 (146) 1,568
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Total liabilities 36,557 (1,575) 113 35,095 (579) 34,516
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SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million
shares authorized, issued and outstanding 100 100 100
Additional paid-in capital 3,452 (401) 3,051 (293) 2,758
Unrealized investment gains (losses), net of taxes (248) 7 (241) 14 (227)
Retained earnings 1,701 51 598 2,350 (33) 2,317
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Total shareholder's equity 5,005 (343) 598 5,260 (312) 4,948
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Total liabilities and shareholder's equity $41,562 $(1,918) $ 711 $40,355 $ (891) $ 39,464
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See notes to pro forma consolidated financial statements.
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THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(Unaudited)
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Less: Less:
(in millions) Historical Metra/Runoff Transport Life Pro Forma
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REVENUES
Premiums $ 693 $ (307) $ (56) $ 330
Net investment income 464 (14) (12) 438
Realized investment gains (losses) (23) (23)
Other, including gains and losses on dispositions 128 (60) 68
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1,262 (381) (68) 813
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BENEFITS AND EXPENSES
Current and future insurance benefits 586 (301) (38) 247
Interest credited to contractholders 260 260
Claim settlement expenses 13 (13) -
Amortization of deferred acquisition costs
and value of insurance in force 72 (1) (5) 66
General and administrative expenses 119 (15) (15) 89
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1,050 (330) (58) 662
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Income before federal income taxes 212 (51) (10) 151
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Federal income taxes 73 (17) (3) 53
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Net income $ 139 $ (34) $ (7) $ 98
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See notes to pro forma consolidated financial statements.
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THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(Unaudited)
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Less: Less:
(in millions) Historical Life & Medical Transport Life Pro Forma
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REVENUES
Premiums $ 3,861 $ (2,369) $ (228) $ 1,264
Net investment income 1,849 (147) (46) 1,656
Realized investment gains (losses) 14 (1) 13
Other, including gains and losses on dispositions 1,023 (825) 198
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6,747 (3,341) (275) 3,131
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BENEFITS AND EXPENSES
Current and future insurance benefits 3,421 (2,206) (138) 1,077
Interest credited to contractholders 967 (54) 913
Claim settlement expenses 193 (191) 2
Amortization of deferred acquisition costs
and value of insurance in force 284 (5) (36) 243
General and administrative expenses 1,025 (625) (61) 339
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5,890 (3,081) (235) 2,574
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Income before federal income taxes 857 (260) (40) 557
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Federal income taxes 312 (101) (13) 198
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Net income $ 545 $ (159) $ (27) $ 359
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See notes to pro forma consolidated financial statements.
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THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1995:
Metra/Runoff Column - reflects removal of all assets, liabilities and equity
remaining for the runoff business; and the removal of the equity interest in
Metra.
Transport Life Column - reflects removal of all assets, liabilities and
equity of Transport Life.
Pro Forma Adjustment Column - gives effect to the sale of the equity
investment in Metra and related after-tax proceeds.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1995:
Metra/Runoff Column - reflects the elimination of runoff operating results,
equity earnings of Metra and the $31 million pretax gain on the sale of the
group life business.
Transport Life Column - reflects the elimination of the operating results of
Transport Life.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1994:
Life & Medical Column - reflects the elimination of the operating results of
the Life businesses sold to MetLife, the group health care business contributed
to Metra, the runoff business transferring to Metra upon renewal date and the
$28 million pretax gain on the sale of the group dental business.
Transport Life Column - reflects the elimination of the operating results of
Transport Life.
In accordance with practice in filings with the SEC, no effect has been given to
the use of proceeds from the sale of the Company's interest in Metra estimated
to be $708 million, excluding contingent consideration.
