<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 JUNE 30, 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
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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 $2.50 per share, of the registrant, all of which were owned by The
Travelers Insurance Group Inc., an indirect wholly owned subsidiary of Citigroup
Inc.
REDUCED DISCLOSURE FORMAT
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format.
<PAGE> 2
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Income for the
Three and Six Months Ended June 30, 2000 and 1999 (unaudited).....................3
Condensed Consolidated Balance Sheets as of June 30, 2000 (unaudited) and
December 31, 1999.................................................................4
Condensed Consolidated Statements of Changes in Retained Earnings and
Accumulated Other Changes in Equity from Non-Owner Sources
For the Three and Six Months Ended June 30, 2000 and 1999 (unaudited).............5
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2000 and 1999 (unaudited)...............................6
Notes to Condensed Consolidated Financial Statements (unaudited)..................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................................12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................................16
SIGNATURES.......................................................................17
</TABLE>
2
<PAGE> 3
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
($ IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Premiums $ 496 $ 435 $ 1,047 $ 843
Net investment income 703 636 1,358 1,221
Realized investment gains (losses) 22 6 20 (133)
Fee income 120 108 256 211
Other revenues 24 29 46 50
------- ------- ------- -------
Total Revenues 1,365 1,214 2,574 2,345
------- ------- ------- -------
BENEFITS AND EXPENSES
Current and future insurance benefits 453 374 929 708
Interest credited to contractholders 248 231 493 457
Amortization of deferred acquisition costs 88 78 173 156
General and administrative expenses 103 125 245 251
------- ------- ------- -------
Total Benefits and Expenses 892 808 1,840 1,572
------- ------- ------- -------
Income from operations before federal income taxes 473 406 734 773
Federal income taxes 158 138 243 262
------- ------- ------- -------
Net Income $ 315 $ 268 $ 491 $ 511
======= ======= ======= =======
</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>
JUNE 30, 2000 DECEMBER 31, 1999
(UNAUDITED)
-------- --------
ASSETS
<S> <C> <C>
Investments $ 35,875 $ 33,488
Separate and variable accounts 24,023 22,199
Reinsurance recoverable 3,233 3,234
Deferred acquisition costs 2,898 2,688
Other assets 2,109 1,922
-------- --------
Total Assets $ 68,138 $ 63,531
-------- --------
LIABILITIES
Contractholder funds $ 17,983 $ 17,567
Future policy benefits and claims 13,002 12,563
Separate and variable accounts 24,022 22,194
Other liabilities 5,243 3,587
-------- --------
Total Liabilities 60,250 55,911
-------- --------
SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million shares authorized,
issued and outstanding 100 100
Additional paid-in capital 3,833 3,819
Retained earnings 4,250 4,099
Accumulated other changes in equity from non-owner sources (295) (398)
-------- --------
Total Shareholder's Equity 7,888 7,620
-------- --------
Total Liabilities and Shareholder's Equity $ 68,138 $ 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
STATEMENTS OF CHANGES IN RETAINED EARNINGS 2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Balance, beginning of period $ 4,105 $ 3,735 $ 4,099 $ 3,602
Net income 315 268 491 511
Dividends to parent (170) (165) (340) (275)
------- ------- ------- -------
Balance, end of period $ 4,250 $ 3,838 $ 4,250 $ 3,838
======= ======= ======= =======
STATEMENTS OF ACCUMULATED OTHER CHANGES
IN EQUITY FROM NON-OWNER SOURCES
Balance, beginning of period $ (184) $ 341 $ (398) $ 598
Unrealized gains (losses), net of tax (111) (402) 103 (659)
------- ------- ------- -------
Balance, end of period $ (295) $ (61) $ (295) $ (61)
======= ======= ======= =======
SUMMARY OF CHANGES IN EQUITY
FROM NON-OWNER SOURCES
Net Income $ 315 $ 268 $ 491 $ 511
Other changes in equity from non-owner sources (111) (402) 103 (659)
------- ------- ------- -------
Total changes in equity from non-owner sources $ 204 $ (134) $ 594 $ (148)
======= ======= ======= =======
</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>
SIX MONTHS ENDED
JUNE 30,
2000 1999
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 815 $ 459
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 1,782 1,490
Mortgage loans 201 305
Proceeds from sales of investments
Fixed maturities 6,606 7,691
Equity securities 242 34
Real estate held for sale 205 26
Purchases of investments
Fixed maturities (9,822) (11,281)
Equity securities (208) (130)
Mortgage loans (170) (109)
Policy loans, net 9 599
Short-term securities (purchases) sales, net (212) 281
Other investments purchases, net (156) (242)
Securities transactions in course of settlement, net 886 181
-------- --------
Net cash used in investing activities (637) (1,155)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 3,007 3,689
Contractholder fund withdrawals (2,777) (2,658)
Dividends to parent company (340) (275)
-------- --------
Net cash provided by (used in) financing activities (110) 756
-------- --------
Net increase in cash 68 60
Cash at beginning of period 85 65
-------- --------
Cash at end of period $ 153 $ 125
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ 210 $ 194
======== ========
</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. In June 2000,
the FASB issued Statement of Financial Accounting Standards No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of FASB Statement No. 133" which amends the
accounting and reporting standards of FAS 133. 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 June 30, 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 TIC. 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 June 30, 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 June 30, 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 $340 million and $275 million in dividends to its parent
during the six months ended June 30, 2000 and 1999, respectively.
4. COMMITMENTS AND CONTINGENCIES
The Company is a defendant or co-defendant in various litigation matters in
the normal course of business. Although there can be no assurances, as of
June 30, 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 15.
8
<PAGE> 9
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
5. SUBSEQUENT EVENT
On July 31, 2000, the Company sold 90% of its individual long-term care
insurance business to General Electric Capital Assurance Company in the
form of an indemnity reinsurance arrangement.
6. OPERATING SEGMENTS
The Company has two reportable business segments that are managed
separately 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 82,000 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
JUNE 30, 2000 ($ IN MILLIONS) ANNUITY INSURANCE TOTAL
------- ------- -------
<S> <C> <C> <C>
BUSINESS VOLUME:
Premiums $219 $277 $496
Deposits 2,930 - 2,930
------- ------- -------
Total business volume 3,149 277 3,426
Net investment income 632 71 703
Net realized investment gains (losses) 24 (2) 22
Other revenues 124 20 144
Less: Deposits (2,930) - (2,930)
------- ------- -------
Total revenues $999 $366 $1,365
Operating Income (excludes realized gains or
losses and the related FIT) $205 $96 $301
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED TRAVELERS LIFE & PRIMERICA LIFE
JUNE 30, 1999 ($ IN MILLIONS) ANNUITY INSURANCE TOTAL
------- ------- -------
<S> <C> <C> <C>
BUSINESS VOLUME:
Premiums $ 167 $ 268 $ 435
Deposits 2,910 -- 2,910
------- ------- -------
Total business volume 3,077 268 3,345
Net investment income 572 64 636
Net realized investment gains 1 5 6
Other revenues 117 20 137
Less: Deposits (2,910) -- (2,910)
------- ------- -------
Total revenues $ 857 $ 357 $ 1,214
Operating Income (excludes realized gains or
losses and the related FIT) $ 175 $ 90 $ 265
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
BUSINESS SEGMENT RECONCILIATION:
FOR THE THREE MONTHS ENDED
JUNE 30 ($ IN MILLIONS)
INCOME: 2000 1999
---- ----
<S> <C> <C>
Total business income of segments $301 $265
Realized investment gains net of tax 14 3
---- ----
Net Income $315 $268
==== ====
</TABLE>
10
<PAGE> 11
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION:
FOR THE SIX MONTHS ENDED TRAVELERS LIFE & PRIMERICA LIFE
JUNE 30, 2000 ($ IN MILLIONS) ANNUITY INSURANCE TOTAL
------- ------- -------
<S> <C> <C> <C>
BUSINESS VOLUME:
Premiums $ 499 $ 548 $ 1,047
Deposits 5,782 -- 5,782
------- ------- -------
Total business volume 6,281 548 6,829
Net investment income 1,219 139 1,358
Net realized investment losses (82) (51) (133)
Other revenues 254 48 302
Less: Deposits (5,782) -- (5,782)
------- ------- -------
Total revenues $ 1,890 $ 684 $ 2,574
Operating Income (excludes realized gains or losses and
the related FIT) $ 392 $ 186 $ 578
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED TRAVELERS LIFE & PRIMERICA LIFE
JUNE 30, 1999 ($ IN MILLIONS) ANNUITY INSURANCE TOTAL
------- ------- -------
<S> <C> <C> <C>
BUSINESS VOLUME:
Premiums $ 308 $ 535 $ 843
Deposits 5,962 -- 5,962
------- ------- -------
Total business volume 6,270 535 6,805
Net investment income 1,095 126 1,221
Net realized investment gains 14 6 20
Other revenues 219 42 261
Less: Deposits (5,962) -- (5,962)
------- ------- -------
Total revenues $ 1,636 $ 709 $ 2,345
Operating Income (excludes realized gains or losses and
the related FIT) $ 320 $ 178 $ 498
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
BUSINESS SEGMENT RECONCILIATION:
FOR THE SIX MONTHS ENDED
JUNE 30 ($ IN MILLIONS)
INCOME: 2000 1999
----- -----
<S> <C> <C>
Total business income of segments $ 578 $ 498
Realized investment gains (losses) net of tax (87) 13
----- -----
Net Income $ 491 $ 511
===== =====
</TABLE>
11
<PAGE> 12
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 FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues $1,365 $1,214 $2,574 $2,345
====== ====== ====== ======
Net income $ 315 $ 268 $ 491 $ 511
====== ====== ====== ======
</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. Operating income, defined as income before net
realized investment gains or losses, was $301 million and $578 million for the
quarter and six months ended June 30, 2000, respectively, up from $265 million
and $498 million for the 1999 comparable periods. Revenues increased 12% and 10%
to $1.4 billion and $2.6 billion for the 2000 quarter and six months,
respectively, reflecting increased business volume and strong investment
results. The increased business volume also drove the 10% and 17% increases in
benefits and expenses for the quarter and six months ended June 30, 2000,
respectively.
The following discussion presents in more detail each business segment's
performance.
TRAVELERS LIFE & ANNUITY
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 2000 1999
---- ----
($ in millions)
<S> <C> <C>
Revenues $999 $857
==== ====
Net income $220 $175
==== ====
</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.
12
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THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
Operating income was $205 million in the second quarter of 2000 compared to $175
million in the second quarter of 1999. The 17% improvement in 2000 reflects
increased business volume and particularly strong investment income versus the
prior year period. During the second quarter of 2000, this business achieved
double-digit business volume growth in individual annuity account balances and
life premiums versus the prior year quarter, reflecting both greater popularity
of estate planning products and significant cross-selling initiatives through
Citigroup distribution channels.
The cross-selling of Travelers Life & Annuity (TLA) products through the
Primerica Financial Services, Inc. (Primerica). Citibank and 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. Also, TLA continues to show strong
sales through the Copeland Companies, which was contributed to CitiStreet,
a joint venture between Citigroup and State Street Bank.
Significant individual annuity sales, combined with favorable market returns
from variable annuities, drove account balances to $28.0 billion at June 30,
2000, up 9% from $25.8 billion at December 31, 1999 and up 22% from $23.0
billion at June 30, 1999. Net premiums and deposits increased 25% in the second
quarter of 2000 to $1.5 billion, from $1.2 billion in the second quarter of
1999. The strong sales reflect marketing initiatives at SSB and Primerica, and
Copeland's continued progress in the small company segment of the 401(k) market,
as well as core agent production.
Group annuity account balances and benefit reserves were $15.8 billion at June
30, 2000, level with December 31, 1999 and up 4% from $15.2 billion at June 30,
1999. The group annuity businesses experienced continued strong sales momentum
in variable guaranteed investment contracts, employer-sponsored group plans and
cross-selling of 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 $1.4 billion in the
second quarter of 2000, compared to $1.6 billion in the comparable period of
1999.
Direct periodic premiums for individual life insurance of $113.4 million in the
second quarter of 2000 were up 31% from $86.7 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 $63.2 billion at June 30, 2000, up from $57.7 million at June 30,
1999.
On July 31, 2000, the Company sold 90% of its individual long-term care
insurance business to General Electric Capital Assurance Company in the form of
an indemnity reinsurance arrangement.
13
<PAGE> 14
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PRIMERICA LIFE INSURANCE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 2000 1999
---- ----
($ in millions)
<S> <C> <C>
Revenues $366 $357
==== ====
Net income $ 95 $ 93
==== ====
</TABLE>
The Primerica Life Insurance business segment offers individual life products,
primarily term insurance, to customers through a nationwide sales force of
approximately 82,000 full and part-time licensed Personal Financial Analysts.
Operating income was $96 million in the second quarter of 2000 compared to $90
million in the second quarter of 1999. An 11% increase in investment income
contributed to the 7% growth in operating earnings.
Earned premiums net of reinsurance were $277 million in the second quarter of
2000 compared to $268 million in the prior year period, including $260 million
and $252 million, respectively, for Primerica individual term life policies.
Life insurance in force reached a record $403.6 billion, up from $391.7 billion
at June 30, 1999, reflecting good policy persistency and stable sales. The face
amount of new term life insurance sales was $18.5 billion for the three month
period ended June 30, 2000, compared to $15.5 billion for the prior year period.
TRAVELERS LIFE & ANNUITY
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 2000 1999
---- ----
($ in millions)
<S> <C> <C>
Revenues $1,890 $1,636
====== ======
Net income $ 338 $ 329
====== ======
</TABLE>
Operating income increased 22% to $392 million in the six months ended June 30,
2000, compared to $320 million in the six months ended June 30, 1999. Earnings
growth was driven by business volume, investment performance and a higher
capital base.
For individual annuities, net written premiums and deposits were $3.0 billion in
the first six months of 2000, up 30% from $2.3 billion in the comparable period
of 1999, reflecting increased growth in the sales of variable annuities.
Group annuity net premiums and deposits were $2.9 billion in the first six
months of 2000, compared to $3.5 billion in the prior year period. The 17%
decrease reflects particularly strong structured finance transactions in the
first six months of 1999.
For individual life insurance, direct periodic premiums were $230 million for
the first half of 2000, up 34% from $171 million in the prior year period. Face
amount of individual life insurance issued during the first half of 2000 was
$5.7 billion, up from $4.9 billion in the prior period of 1999.
14
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THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PRIMERICA LIFE INSURANCE
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 2000 1999
---- ----
($ in millions)
<S> <C> <C>
Revenues $684 $709
==== ====
Net income $153 $182
==== ====
</TABLE>
Earnings before gains on investments for the first six months of 2000 increased
4% to $186 million, compared to $178 million in the first six months of 1999.
Face amount of new term life insurance sales was $33.5 billion in the first six
months of 2000, up from $29.1 billion in 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 June 30, 2000, 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 $340 million and $275 million in dividends to its parent during the
six months ended June 30, 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.
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<PAGE> 16
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
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
</TABLE>
------------------
+ Filed herewith.
(b) REPORTS ON FORM 8-K.
None
16
<PAGE> 17
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 August 11, 2000 /s/ Glenn D. Lammey
Glenn D. Lammey
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
(Principal Financial Officer and
Principal Accounting Officer)
17
