<PAGE> 1
UNITED STATES 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 MARCH 31, 2000
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 the date hereof, there were outstanding 40,000,000 shares of common stock,
par value $2.50 per share, of the registrant, all of which were owned by The
Travelers Insurance Group Inc., an indirect wholly owned subsidiary of Citigroup
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
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
----
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 2000 and 1999 (unaudited)......................................... 3
Condensed Consolidated Balance Sheets as of March 31, 2000 (unaudited) and
December 31, 1999.............................................................................. 4
Condensed Consolidated Statements of Changes in Retained Earnings and
Accumulated Other Changes in Equity from Non-Owner Sources
for the Three Months Ended March 31, 2000 and 1999 (unaudited)................................. 5
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999 (unaudited)......................................... 6
Notes to Condensed Consolidated Financial Statements (unaudited)............................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................................. 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS..................................................................... 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................................... 14
SIGNATURES..................................................................................... 15
EXHIBIT 99.01.................................................................................. 16
</TABLE>
2
<PAGE> 3
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
($ IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
- ----------------------------------------------------------------------------------------------------------------------
2000 1999
---- ----
REVENUES
<S> <C> <C>
Premiums $551 $408
Net investment income 655 585
Realized investment gains (losses) (155) 14
Other revenues 158 124
- ----------------------------------------------------------------------------------------------------------------------
Total Revenues 1,209 1,131
- ----------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future insurance benefits 476 334
Interest credited to contractholders 245 226
Amortization of deferred acquisition costs 85 78
General and administrative expenses 142 126
- ----------------------------------------------------------------------------------------------------------------------
Total Benefits and Expenses 948 764
- ----------------------------------------------------------------------------------------------------------------------
Income from operations before federal income taxes 261 367
Federal income taxes 85 124
- ----------------------------------------------------------------------------------------------------------------------
Net Income $176 $243
======================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Investments $35,283 $33,488
Separate and variable accounts 23,885 22,199
Reinsurance recoverable 3,232 3,234
Deferred acquisition costs 2,785 2,688
Other assets 2,729 1,922
- ------------------------------------------------------------------------------------------------------------------------
Total Assets $67,914 $63,531
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Contractholder funds $17,771 $17,567
Future policy benefits and claims 12,856 12,563
Separate and variable accounts 23,881 22,194
Other liabilities 5,559 3,587
- ------------------------------------------------------------------------------------------------------------------------
Total Liabilities 60,067 55,911
- ------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million shares authorized,
issued and outstanding 100 100
Additional paid-in capital 3,826 3,819
Retained earnings 4,105 4,099
Accumulated other changes in equity from non-owner sources (184) (398)
- ------------------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 7,847 7,620
- ------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholder's Equity $67,914 $63,531
========================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS AND
ACCUMULATED OTHER CHANGES IN EQUITY FROM NON-OWNER SOURCES
(UNAUDITED)
($ IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
STATEMENTS OF CHANGES IN RETAINED EARNINGS 2000 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of period $ 4,099 $ 3,602
Net income 176 243
Dividends to parent (170) (110)
- ------------------------------------------------------------------------------------------
Balance, end of period $ 4,105 $ 3,735
==========================================================================================
STATEMENTS OF ACCUMULATED OTHER CHANGES
IN EQUITY FROM NON-OWNER SOURCES
- ------------------------------------------------------------------------------------------
Balance, beginning of period $ (398) $ 598
Unrealized gains (losses), net of tax 214 (257)
- ------------------------------------------------------------------------------------------
Balance, end of period $ (184) $ 341
==========================================================================================
SUMMARY OF CHANGES IN EQUITY
FROM NON-OWNER SOURCES
- ------------------------------------------------------------------------------------------
Net Income $ 176 $ 243
Other changes in equity from non-owner sources 214 (257)
- ------------------------------------------------------------------------------------------
Total changes in equity from non-owner sources $ 390 $ (14)
==========================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(UNAUDITED)
($ IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
- ---------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $251 $587
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 897 656
Mortgage loans 90 254
Proceeds from sales of investments
Fixed maturities 4,479 4,011
Equity securities 125 3
Real estate held for sale - 29
Purchases of investments
Fixed maturities (6,207) (6,199)
Equity securities (95) (59)
Mortgage loans (122) (48)
Policy loans, net 5 174
Short-term securities (purchases) sales, net (139) 92
Other investments purchases, net (104) (100)
Securities transactions in course of settlement, net 671 285
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (400) (902)
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 1,497 1,943
Contractholder fund withdrawals (1,161) (1,538)
Dividends to parent company (170) (110)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 166 295
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 17 (20)
Cash at beginning of period 85 65
- ---------------------------------------------------------------------------------------------------------
Cash at end of period $102 $ 45
=========================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $47 $ 22
=========================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE> 7
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The interim consolidated financial statements of The Travelers
Insurance Company (TIC; together with its subsidiaries, the Company),
an indirect wholly owned subsidiary of Citigroup Inc. (Citigroup), have
been prepared in conformity with generally accepted accounting
principles (GAAP) and are unaudited. The consolidated financial
statements include the accounts of TIC and its insurance and
non-insurance subsidiaries on a fully consolidated basis. In the
opinion of management, the interim financial statements reflect all
adjustments necessary (all of which were normal recurring adjustments)
for a fair presentation 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 Annual Report on Form 10-K for the year
ended December 31, 1999.
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.
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). In June 1999,
the FASB issued Statement of Financial Standards No. 137, "Deferral of
the Effective Date of FASB Statement No. 133" (FAS 137), which allows
entities that have not yet adopted FAS 133 to defer its effective date
to all fiscal quarters of all fiscal years beginning after June 15,
2000. FAS 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded 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 consolidated balance
sheet and measure those instruments at fair value. 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 recognized asset or liability
or 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. Upon initial application of FAS 133, hedging relationships
must be designated anew and documented pursuant to the provisions of
this statement. The Company adopted the deferral provisions of FAS 137,
effective January 1, 2000 and has not yet determined the impact that
FAS 133 will have on its consolidated financial statements.
7
<PAGE> 8
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
2. COMMERCIAL PAPER AND LINES OF CREDIT
TIC has issued commercial paper directly to investors in prior years.
No commercial paper was outstanding at March 31, 2000 or December 31,
1999. TIC must maintain bank lines of credit at least equal to the
amount of the outstanding commercial paper. Citigroup and TIC have an
agreement with a syndicate of banks to provide $1.0 billion of
revolving credit, to be allocated to Citigroup or the Company. TIC's
participation in this agreement is limited to $250 million. The
agreement consists of a five-year revolving credit facility that
expires in June 2001. At March 31, 2000 and December 31, 1999, no
credit under this agreement was allocated to TIC. Under this facility
TIC is required to maintain certain minimum equity and risk-based
capital levels. At March 31, 2000, the Company was in compliance with
these provisions. If TIC had borrowings outstanding on this facility,
the interest rate would be based upon LIBOR plus a contractually
negotiated margin.
3. SHAREHOLDER'S EQUITY
Statutory capital and surplus of the Company was $5.03 billion at
December 31, 1999. The Company is 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 $679 million is available in 2000 for
dividend payments by the Company without prior approval of the
Connecticut Insurance Department. The Company paid $170 million and
$110 million in dividends to its parent during the three months ended
March 31, 2000 and 1999, respectively.
4. COMMITMENTS AND CONTINGENCIES
Litigation
For information concerning a purported class action entitled Patterman
v. The Travelers, Inc., et al, see the description that appears in the
second paragraph under the caption "Legal Proceedings" beginning on
page 6 of the Annual Report on Form 10-K of the Company for the year
ended December 31, 1999 (File No. 33-33691), which description is
included as Exhibit 99.01 to this Form 10-Q and incorporated by
reference herein. On March 24, 2000, the Georgia Supreme Court denied
defendants' motion for reconsideration of its February 28, 2000
decision, and the matter was remanded to the Superior Court of Richmond
County in April 2000. On April 25, 2000, defendants moved for summary
judgment on all counts of the complaint. In May 2000, discovery
commenced.
8
<PAGE> 9
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
The Company is also a defendant or co-defendant in various litigation
matters in the normal course of business. Although there can be no
assurances, as of March 31, 2000, 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. This
statement is a forward-looking statement within the meaning of the
Private Securities Litigation Reform Act. See "Forward-Looking
Statements" on page 13.
5. SUBSEQUENT EVENT
On April 17, 2000, the Company announced that it had agreed to sell 90%
of its individual long-term care insurance business to General Electric
Capital Assurance Company. The transaction will take the form of an
indemnity reinsurance arrangement. This transaction is subject to
regulatory approvals and other customary closing conditions, and is
expected to close in the third quarter of 2000.
6. OPERATING SEGMENTS
The Company has two reportable business segments that are separately
managed due to differences in products, services, marketing strategy
and resource management. The business of each segment is maintained and
reported through separate legal entities within the Company. The
management groups of each segment report separately to the common
ultimate parent, Citigroup Inc.
The TRAVELERS LIFE & ANNUITY business segment consolidates primarily
the business of TIC and The Travelers Life and Annuity Company (TLAC).
Travelers Life & Annuity core offerings include individual annuity,
group annuity and individual life insurance products distributed by TIC
and TLAC under the Travelers name. Among the range of individual
products offered are fixed and variable deferred annuities, payout
annuities and term, universal and variable life insurance. The group
products include institutional pensions, including guaranteed
investment contracts, payout annuities, group annuities to
employer-sponsored retirement and savings plans and structured finance
transactions.
The PRIMERICA LIFE business segment consolidates primarily the business
of Primerica Life Insurance Company, Primerica Life Insurance Company
of Canada and National Benefit Life Insurance Company. The Primerica
Life business segment offers individual life products, primarily term
insurance, to customers through a nationwide sales force of
approximately 80,000 full and part-time licensed Personal Financial
Analysts.
9
<PAGE> 10
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION:
- --------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED TRAVELERS LIFE & PRIMERICA LIFE
MARCH 31, 2000 ($ in millions) ANNUITY INSURANCE TOTAL
- --------------------------------------------------------------------------------------------------------------------
BUSINESS VOLUME:
<S> <C> <C> <C>
Premiums $ 281 $270 $551
Deposits 2,852 - 2,852
------ ---- -----
Total business volume 3,133 270 3,403
Net investment income 586 69 655
Net realized investment losses (106) (49) (155)
Other revenues 130 28 158
Less: Deposits (2,852) - (2,852)
------ ---- -----
Total revenues $891 $318 $1,209
Business Income (excludes realized gains or
losses and the related FIT) $187 $90 $277
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED TRAVELERS LIFE & PRIMERICA LIFE
MARCH 31, 1999 ($ in millions) ANNUITY INSURANCE TOTAL
- --------------------------------------------------------------------------------------------------------------------
BUSINESS VOLUME:
<S> <C> <C> <C>
Premiums $141 $267 $408
Deposits 3,052 - 3,052
------ ---- -----
Total business volume 3,193 267 3,460
Net investment income 523 62 585
Net realized investment gains 13 1 14
Other revenues 102 22 124
Less: Deposits (3,052) - (3,052)
------ ---- -----
Total revenues $779 $352 $1,131
Business Income (excludes realized gains or
losses and the related FIT) $145 $88 $233
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BUSINESS SEGMENT RECONCILIATION:
- ------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
MARCH 31 ($ in millions) 2000 1999
- ------------------------------------------------------------------------------------------
INCOME:
<S> <C> <C>
Total business income of segments $277 $233
Realized investment gains (losses) net of tax (101) 10
- ------------------------------------------------------------------------------------------
Net Income $176 $243
==========================================================================================
</TABLE>
10
<PAGE> 11
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's narrative analysis of the results of operations is presented in
lieu of Management's Discussion and Analysis of Financial Condition and Results
of Operations, pursuant to General Instruction H(2)(a) of Form 10-Q.
CONSOLIDATED OVERVIEW ($ in millions)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
2000 1999
---- ----
<S> <C> <C>
Revenues $1,209 $1,131
====== ======
Net income $ 176 $ 243
====== ======
</TABLE>
The Travelers Insurance Company (TIC; together with its subsidiaries, the
Company), is comprised of two business segments, Travelers Life & Annuity and
Primerica Life Insurance. Business income, defined as income before net realized
investment gains or losses, for the three months ended March 31, 2000 increased
19% to $277 million from $233 million in the prior year quarter. Revenues
increased 7% to $1,209 million driven by strong business volume reflected in a
35% increase in premiums and a 27% increase in other revenues. These business
volume increases were largely offset by realized losses taken to enhance
investment portfolio performance. The business volume increases also drove the
24% increase in benefits and expenses.
The following discussion presents in more detail each business segment's
performance.
TRAVELERS LIFE & ANNUITY
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 2000 1999
($ in millions) ---- ----
<S> <C> <C>
Revenues $891 $779
==== ====
Net income $118 $154
==== ====
</TABLE>
Travelers Life & Annuity core offerings include individual annuity, group
annuity and individual life and long-term care products distributed by TIC and
The Travelers Life and Annuity Company (TLAC) under the Travelers name. Among
the range of individual products offered are fixed and variable deferred
annuities, payout annuities and term, universal and variable life and long-term
care insurance. The group products include institutional pensions, including
guaranteed investment contracts, payout annuities, group annuities to
employer-sponsored retirement and savings plans and structured finance
transactions. The majority of the annuity business and a substantial portion of
the life business written by Travelers Life & Annuity are accounted for as
investment contracts, with the result that the deposits collected are reported
as liabilities and are not included in revenues.
11
<PAGE> 12
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
Business income was $187 million in the first quarter of 2000 compared to $145
million in the first quarter of 1999. The 29% improvement in 2000 reflects
increased business volume and particularly strong investment income versus the
prior year period. During the first quarter of 2000, this business achieved
double-digit business volume growth in annuity account balances and direct
periodic life premiums versus the prior year quarter, reflecting both greater
popularity of estate planning products and significant cross-selling initiatives
through Citigroup distribution channels. Also included in net income in 1999 is
a $6 million after-tax release of reserves in connection with a favorable lease
renegotiation related to the runoff group life and health business.
On April 17, 2000, the Company announced that it had agreed to sell 90% of its
individual long-term care insurance business to General Electric Capital
Assurance Company. The transaction will take the form of an indemnity
reinsurance arrangement. This transaction is subject to regulatory approvals and
other customary closing conditions, and is expected to close in the third
quarter of 2000.
The successful cross-selling of Travelers Life & Annuity products through the
Primerica Financial Services, Inc. (Primerica), Citibank, The Copeland Companies
(Copeland), and the Financial Consultants of Salomon Smith Barney (SSB)
distribution channels, along with improved sales through a nationwide network of
independent agents and strong group sales through various intermediaries,
reflect ongoing efforts to build market share by strengthening relationships in
key distribution channels.
Significant individual annuity sales, combined with favorable market returns
from variable annuities, drove account balances to $28.0 billion at March 31,
2000, up 34% from $20.9 billion at March 31, 1999. Net premiums and deposits
increased 36% in the first quarter of 2000 to $1.5 billion, from $1.1 billion in
the first quarter of 1999. The strong sales reflect successful marketing
initiatives at SSB and Primerica, and Copeland's continued success in the small
company segment of the 401(k) market, as well as core agent production.
Group annuity account balances and benefit reserves reached $15.6 billion at
March 31, 2000, up 12% from $13.9 billion at March 31, 1999. The group annuity
businesses experienced continued strong sales momentum in guaranteed investment
contracts, employer sponsored group plans and cross-selling structured
settlement annuities through Travelers Property Casualty Corp. (TAP), an
affiliate of the Company. Net premiums and deposits (excluding Citigroup's
employee pension plan deposits) were $1.46 billion in the first quarter of 2000,
compared to $1.86 billion in the comparable period of 1999. The first quarter of
1999 included a large structured finance transaction which resulted in the
decrease in premiums and deposits between periods.
Direct periodic premiums for individual life insurance of $116.7 million in the
first quarter of 2000 were up 38% from $84.5 million in the comparable period of
1999, reflecting strong agency results and the introduction in the fourth
quarter of 1999 of a new corporate-owned life insurance product. Life insurance
in force was $61.7 billion at March 31, 2000, up from $60.6 billion at year end
1999 and $56.6 billion at March 31, 1999.
PRIMERICA LIFE INSURANCE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 2000 1999
($ in millions) ---- ----
<S> <C> <C>
Revenues $318 $352
==== ====
Net income $ 58 $ 89
==== ====
</TABLE>
12
<PAGE> 13
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
The Primerica Life business segment offers individual life products, primarily
term insurance, to customers through a nationwide sales force of approximately
80,000 full and part-time licensed Personal Financial Analysts.
Business income was $90 million in the first quarter of 2000 compared to $88
million in the first quarter of 1999. The 2% improvement in 2000 reflects growth
in life insurance in force and strong net investment income, partially offset by
increased infrastructure investment for initiatives scheduled for later in the
year.
Earned premiums net of reinsurance were $270 million in the first quarter of
2000 compared to $267 million in the prior year period, including $255 million
and $252 million, respectively, for Primerica individual term life policies.
Total life insurance in force reached a record $397.8 billion, up from $394.9
billion at year end 1999 and $386.3 billion at March 31, 1999, reflecting good
policy persistency and stable sales. The face amount of new term life insurance
sales was $15.0 billion for the three-month period ended March 31, 2000,
compared to $13.6 billion for the prior year period.
INSURANCE REGULATIONS
Risk-based capital requirements are used as minimum capital requirements by the
National Association of Insurance Commissioners and the states to identify
companies that merit further regulatory action. At December 31, 1999, the
Company 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 be paid to its parent without prior approval of
insurance regulatory authorities in the state of domicile. The maximum amount of
dividends available to be paid to the Company's shareholder in 2000 without
prior approval of the Connecticut Insurance Department is $679 million. The
Company paid $170 million and $110 million in dividends to its parent during the
three months ended March 31, 2000 and 1999, respectively.
FUTURE APPLICATIONS OF ACCOUNTING STANDARDS
See Note 1 of Notes to Condensed Consolidated Financial Statements for Future
Application of Accounting Standards.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company's actual results may differ materially from
those included in the forward-looking statements. Forward-looking statements are
typically identified by the words "believe," "expect," "anticipate," "intend,"
"estimate," "may increase," "may fluctuate," and similar expressions, or future
or conditional verbs such as "will," "should," "would," and "could." These
forward-looking statements involve risks and uncertainties including, but not
limited to, the resolution of legal proceedings.
13
<PAGE> 14
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information concerning a purported class action entitled Patterman v.
The Travelers, Inc., et al, see the description that appears in the second
paragraph under the caption "Legal Proceedings" beginning on page 6 of the
Annual Report on Form 10-K of the Company for the year ended December 31, 1999
(File No. 33-33691), which description is included as Exhibit 99.01 to this Form
10-Q and incorporated by reference herein. On March 24, 2000, the Georgia
Supreme Court denied defendants' motion for reconsideration of its February 28,
2000 decision, and the matter was remanded to the Superior Court of Richmond
County in April 2000. On April 25, 2000, defendants moved for summary judgment
on all counts of the complaint. In May 2000, discovery commenced.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
3.01 Charter of The Travelers Insurance Company (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 fiscal quarter ended
September 30, 1994 (File No. 33-33691) (the "Company's
September 30, 1994 10-Q").
3.02 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.
27.01 + Financial Data Schedule
99.01 + Second paragraph under the caption "Legal Proceedings"
beginning on page 6 of the Annual Report on Form 10-K of
the Company for the year ended December 31, 1999 (File
No. 33-33691)
+ Filed herewith.
(b) REPORTS ON FORM 8-K
None
14
<PAGE> 15
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
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 May 12, 2000 /s/ Glenn D. Lammey
----------------- ----------------------------------------------------
Glenn D. Lammey
Executive Vice President,
Chief Financial Officer and Chief Accounting Officer
(Principal Financial Officer)
15
<PAGE> 1
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
Exhibit 99.01: Second paragraph under the caption "Legal Proceedings" beginning
on page 6 of the Annual Report on Form 10-K of the Company for the year ended
December 31, 1999 (File no. 33-33691).
In March 1997, a purported class action entitled Patterman v. The Travelers,
Inc. et al. was commenced in the Superior Court of Richmond County, Georgia,
alleging, among other things, violations of the Georgia RICO statute and other
state laws by an affiliate of the Company, Primerica Financial Services, Inc.
and certain of its affiliates. Plaintiffs seek unspecified compensatory and
punitive damages and other relief. In October 1997, defendants answered the
complaint, denied liability and asserted numerous affirmative defenses. In
February 1998, the Superior Court of Richmond County transferred the lawsuit
to the Superior Court of Gwinnett County, Georgia. The plaintiffs appealed the
transfer order, and in December 1998 the Court of Appeals of the State of
Georgia reversed the lower court's decision. Later in December 1998, defendants
petitioned the Georgia Supreme Court to hear the appeal from the decision of
the Court of Appeals. Pending appeal, proceedings in the trial court have been
stayed. Defendants intend to vigorously contest the litigation.
16
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 35,283
<CASH> 102
<RECOVER-REINSURE> 3,232
<DEFERRED-ACQUISITION> 2,785
<TOTAL-ASSETS> 67,914
<POLICY-LOSSES> 12,856
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 41,652
<NOTES-PAYABLE> 0
0
0
<COMMON> 100
<OTHER-SE> 7,747
<TOTAL-LIABILITY-AND-EQUITY> 67,914
551
<INVESTMENT-INCOME> 655
<INVESTMENT-GAINS> (155)
<OTHER-INCOME> 158
<BENEFITS> 721
<UNDERWRITING-AMORTIZATION> 85
<UNDERWRITING-OTHER> 142
<INCOME-PRETAX> 261
<INCOME-TAX> 85
<INCOME-CONTINUING> 176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 176
<EPS-BASIC> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
