SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
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) March 1, 1994
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The Travelers Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-9924 52-1568099
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
65 East 55th Street, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
(212) 891-8900
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(Registrant's telephone number, including area code)
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THE TRAVELERS INC.
Current Report on Form 8-K
Item 5. Other Events.
The Travelers Inc. (the "Company") has filed a
registration statement with the Securities and Exchange
Commission, to register for sale certain securities of the
Company held by American Express Company. In order to update the
information incorporated by reference into that registration
statement, as well as the Company's other shelf registration
statements, the Company is including in this Current Report on
Form 8-K the following information regarding legal proceedings,
which otherwise would be filed as part of the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
By virtue of the merger on December 31, 1993, of The
Travelers Corporation ("old Travelers") with and into the Company
(the "Merger"), the Company has succeeded to the liabilities of
old Travelers. Old Travelers or its subsidiaries are involved in
the following pending matters.
As previously disclosed by the Company, in response to
the announcement in September 1993 of the merger between the
Company and old Travelers, a number of purported class action
lawsuits were filed in state court in Connecticut and New York
against old Travelers, its directors and the Company and certain
of its directors. For information concerning these cases, see
the description that appears in the last paragraph on page 2 and
the first two paragraphs on page 3 of the Company's Current
Report on Form 8-K dated September 23, 1993, and the third
paragraph on page 26 of the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1993, which
descriptions are incorporated by reference herein. A copy of the
pertinent paragraphs of such filings is included as Exhibit 99.01
to this Form 8-K. These cases are now consolidated in
Connecticut in a case entitled Robert Brandt, IRA, et al. v. The
Travelers Corporation, et al. The consolidated amended complaint
generally seeks damages on behalf of shareholders of old
Travelers based on the alleged inadequacy of the merger
consideration offered by the Company under the terms of the
merger agreement. In January 1994, the defendants filed a motion
to dismiss the case based on, among other things, Connecticut law
limiting claims by dissenting shareholders to statutory appraisal
rights.
In a case entitled United States v. Travelers Insurance
Co., filed in the United States District Court for the District
of Connecticut in April 1989, the federal government alleges that
old Travelers improperly handled health benefit claims for
individuals who are actively employed and eligible for Medicare
coverage. In November 1992, the Court ruled on cross motions for
summary judgment, and found that old Travelers had no liability
for actions taken in its capacity as a claims administrator.
However, the Court also recognized that the government's right of
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recovery is independent of the rights of the insured, and is not
governed by procedural limitations in the plans.
In a case entitled The Travelers Insurance Company et
al. v. Richard John Ratcliffe Keeling et al., filed in New York
Supreme Court in June 1991, old Travelers seeks to enforce
reinsurance contracts with certain underwriters at Lloyd's of
London with respect to recoveries for certain asbestos claims.
In January 1994, the Court stayed litigation of this matter in
favor of arbitration. The issues before the arbitration panel
include the underwriters' breach of contract and anticipated
breach of their agreement with the Company on asbestos-related
reinsurance claims.
Certain of the subsidiaries that the Company acquired
in the Merger are involved in defending against claims asserting
alleged injuries and damages from asbestos and other hazardous
and toxic substances. For additional information with respect
to these claims, reference is made to the discussion of asbestos
and environmental litigation contained on pages 27 through 30
of the Quarterly Report on Form 10-Q of old Travelers for the
fiscal quarter ended September 30, 1993, which discussion is
incorporated by reference herein. A copy of the pertinent part
of that filing is included as Exhibit 99.02 hereto.
The Securities and Exchange Commission (the
"Commission") has been conducting a nonpublic inquiry pursuant to
an order of investigation with respect to old Travelers'
accounting, reporting and disclosure treatment of certain matters
in connection with its lending and loss recognition practices
pertaining to real estate investments and related matters going
back to January 1, 1988. The Company is cooperating fully with
the Commission's staff.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(c) Exhibits.
Exhibit No. Description
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99.01 The last paragraph on page 2 and
the first two paragraphs on page 3
of the Company's Current Report on
Form 8-K dated September 23, 1993,
and the third paragraph on page 26
of the Company's Quarterly Report
on Form 10-Q for the fiscal quarter
ended September 30, 1993.
99.02 Pages 27 through 30 of the
Quarterly Report on Form 10-Q of
old Travelers for the fiscal
quarter ended September 30, 1993.
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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: March 1, 1994 THE TRAVELERS INC.
By: /s/ Charles O. Prince, III
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Charles O. Prince, III
Senior Vice President
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EXHIBIT INDEX
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Exhibit No.
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99.01 The last paragraph on page 2 and
the first two paragraphs on page 3
of the Company's Current Report on
Form 8-K dated September 23, 1993,
and the third paragraph on page 26
of the Company's Quarterly Report
on Form 10-Q for the fiscal quarter
ended September 30, 1993.
99.02 Pages 27 through 30 of the
Quarterly Report on Form 10-Q of
old Travelers for the fiscal
quarter ended September 30, 1993.
5
Exhibit 99.01
Primerica Corporation
Current Report on Form 8-K
dated September 23, 1993
Last paragraph on page 2
and first two paragraphs on page 3
On September 22, 1993, Primerica and TC [The Travelers
Corporation] issued a joint press release announcing that they
were engaged in discussions concerning a possible business
merger. On that day, complaints with respect to seven purported
class actions were filed in the Connecticut Superior Court for
the Judicial District of Hartford at Hartford/New Britain,
generally naming TC, Primerica and the individual directors of TC
as defendants. On September 23, 1993, complaints with respect to
six purported class actions were filed with that court and two
actions were brought in the Connecticut Superior Court for the
Judicial District of New Haven at New Haven, and on September 24,
1993, four such complaints were filed, two in the Superior Court
for the Judicial District of Hartford and two in the Superior
Court for the Judicial District of New Haven. Primerica was
named as a defendant in all but two of these nineteen actions.
It is possible that additional actions of this nature may be
filed.
Each of the plaintiffs in these cases alleges, among other
things, that (i) such plaintiff is a holder of TC stock; (ii) the
defendants have by their wrongful acts deprived the plaintiffs of
the opportunity to maximize the value of their TC Common Stock;
(iii) the individual defendants have, as directors of TC,
breached their fiduciary duties of good faith, fair dealing, due
care and candor to the public stockholders of TC; and (iv) that
the exchange ratio of Primerica Common Stock for TC Common Stock
contemplated by the Merger is grossly inadequate and unfair.
The plaintiffs request, in each case, certification of the
action as a class action and of the plaintiffs as class
representatives, and seek relief in various forms, including:
declaratory judgment that the defendants have breached their
fiduciary duties to the plaintiffs and other members of the class
of TC's shareholders; an order that the defendants take
appropriate measures to assure an open and vigorous auction for
TC; to maximize shareholder value; preliminary and permanent
injunctive relief against the defendants' proceeding with the
merger, or alternatively if the merger shall be consummated, its
rescission; compensatory damages, costs and counsel fees for the
plaintiffs; and/or such other relief as the court may deem just
and equitable.
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Primerica Corporation
Quarterly Report on Form 10-Q
for the quarter ended 9/30/93
Third paragraph on page 26
For information concerning purported class action lawsuits
arising from the announcement of the proposed merger between the
Company [Primerica Corporation] and Travelers [The Travelers
Corporation], reference is made to the description that appears
in Item 5 of the Company's Current Report on Form 8-K dated
September 23, 1993. Since the filing of that report, one
additional purported class action suit arising from the
announcement of the proposed merger has been brought in the New
York State Supreme Court.
The Travelers Corporation
Quarterly Report on Form 10-Q
for the quarter ended 9/30/93
Pages 27 through 30
Environmental Claims
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For environmental claims, as a result of various
state and federal regulatory efforts aimed at environmental
remediation (particularly "Superfund"), the insurance industry
has been, and continues to be, involved in extensive litigation
involving policy coverage and liability issues. The anticipated
reauthorization of Superfund in 1994 may have some effect on the
resolution of these issues, but it is not possible at the present
time to determine what the potential impact, if any, will be. In
addition to the regulatory pressures, certain court decisions
have expanded insurance coverage beyond the original intent of
the insurer and insured, frequently involving policies that were
issued prior to the mid-1970s. The results of court decisions
affecting the industry's coverage positions continue to be
inconsistent. Accordingly, the ultimate responsibility and
liability for environmental remediation costs remain uncertain.
Travelers is part of the industry segment affected
by these issues and continues to receive claims alleging
liability exposures arising out of insureds' alleged disposition
of toxic substances. The review of environmental claims includes
an assessment of the probable liability, available coverage,
judicial interpretations and historic value of similar claims.
In addition, the unique facts presented in each claim are
evaluated individually and collectively. Due consideration is
given to the many variables presented in each claim, such as: the
nature of the alleged activities of the insured at each site; the
allegations of environmental damage at each site; the number of
sites; the total number of potentially responsible parties at
each site; the nature of environmental harm and the corresponding
remedy at a site; the nature of government enforcement activities
at each site; the ownership and general use of each site; the
willingness and ability of other potentially responsible parties
to contribute to the cost of the required remediation at each
site; the overall nature of the insurance relationship between
Travelers and the insured; the identification of other insurers;
the potential coverage available, if any; the number of years of
coverage, if any; and the applicable law in each jurisdiction.
Analysis of these and other factors on a case-by-case basis
results in ultimate reserve assessment.
To date, Travelers has been successful in its
coverage litigation and continues to reduce its potential
exposure through favorable settlements with certain insureds.
These settlement agreements with certain insureds are based on
the variables presented in each piece of coverage litigation.
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Generally the settlement dollars paid in disputed coverage claims
are a percentage of the total coverage sought by such insureds.
In addition, with respect to many of the environmental claims
there is a "buy-back" of future environmental liability risks by
Travelers, together with appropriate indemnities and hold
harmless provisions to protect Travelers.
The following table displays activity for
environmental losses and loss expenses and reserves for the nine
months ended September 30, 1993 and 1992. Approximately 10% of
the net environmental loss reserve (e.g. approximately $35
million) is case reserve for resolved claims. Travelers does not
post case reserves for environmental claims in which there is a
coverage dispute. The remainder of the reserve is for: i)
claims in which coverage is in dispute and ii) unreported
environmental losses.
Environmental Losses
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(in millions)
1993 1992
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Beginning reserves:
Direct $ 194 $170
Ceded - -
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Net 194 170
Incurred losses and loss expenses:
Direct 183 56
Ceded (14) (2)
Losses paid:
Direct 48 33
Ceded (11) (2)
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Ending reserves:
Direct 329 193
Ceded (3) -
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Net $ 326 $ 193
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The reinsurance claim for environmental losses has
been relatively minor due to the allocation of the favorable
settlement amounts over the appropriate policy years.
The industry does not have a standard method of
calculating claim activity for environmental losses. Generally,
for environmental claims, Travelers establishes a claim file for
each insured on a per site, per claimant basis. If there is more
than one claimant, e.g., a federal and a state agency, this
method will result in two claims being set up for a policyholder
at that one site.
Travelers adheres to its method of calculating claim
activity on all environmental-related claims, whether such claims
are tendered on primary, excess or umbrella policies.
As of September 30, 1993, Travelers had approximately
8,900 pending environmental-related claims and had resolved over
11,700 such claims since 1986. Approximately 75% of the pending
environmental-related claims are property damage claims
instituted by governmental agencies, seeking remediation of
contaminated property. The balance represents bodily injury
claims alleging injury due to the discharge of insureds' waste or
pollutants.
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Asbestos Claims
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In the area of asbestos claims, the industry has
suffered from judicial interpretations that have attempted to
maximize insurance availability from both a coverage and
liability standpoint far beyond the intentions of the contracting
parties. These policies generally were issued prior to the
1980s. Originally the cases involved mainly plant workers and
traditional asbestos manufacturers and distributors. However, in
the mid-1980s, a new group of plaintiffs, whose exposure to
asbestos was less direct and whose injuries were often
speculative, began to file lawsuits in increasing numbers against
the traditional defendants as well as peripheral defendants who
had produced products that may have contained small amounts of
some form of encapsulated asbestos. These claims continue to
arise and on an individual basis generally involve smaller
companies and small limits of potential coverage. As a result,
state and federal court dockets became clogged with asbestos
cases. This backlog has given rise to various efforts, including
the consolidation of federal cases in Philadelphia in 1993 to
alleviate the congestion. More recently, there have emerged a
group of non-product claims by plaintiffs, mostly independent
labor union workers, mainly against companies, alleging exposure
to asbestos while working at these companies' premises. In
addition, various insurers, including Travelers, remain
defendants in a widely publicized action brought in Philadelphia
regarding potential resolution of future asbestos bodily injury
claims. The cumulative effect of these judicial actions on
Travelers and its insureds currently is uncertain.
As a result of recent developments in asbestos
litigation, various classes of asbestos defendants, e.g., major
product manufacturers, peripheral and regional product defendants
as well as premises owners, are tendering asbestos-related claims
to the industry. The industry is responding to the various
additional liability and coverage issues presented by each
insured. Since each insured presents different liability and
coverage issues, Travelers evaluates those issues on an insured-
by-insured basis.
Travelers evaluations have not resulted in any
meaningful average asbestos defense or indemnity payment. The
varying defense and indemnity payments made by Travelers on
behalf of its insureds has also precluded Travelers from deriving
any meaningful data by which it can predict whether its defense
and indemnity payments for asbestos claims (on average or in the
aggregate) will remain the same or change in the future.
The following table displays activity for asbestos
losses and loss expenses and reserves for the nine months ended
September 30, 1993 and 1992. Approximately 80% of the net
asbestos reserves at September 30, 1993 represented incurred but
not reported losses.
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Asbestos Losses
(in millions)
1993 1992
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Beginning reserves:
Direct $ 425 $ 395
Ceded (247) (220)
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Net 178 175
Incurred losses and loss expenses:
Direct 409 87
Ceded (193) (43)
Losses paid:
Direct 65 51
Ceded (15) (15)
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Ending reserves:
Direct 769 431
Ceded (425) (248)
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Net $ 344 $ 183
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It is presently anticipated that future reinsurance
billings for asbestos will be $425 million, with 33% going to the
domestic and 67% to the foreign reinsurance markets. This
current estimate is based on a review of each insured's projected
asbestos exposure and policies, as well as Travelers reinsurance
contracts.
In relation to those asbestos and environmental-related
claims, Travelers carries on a continuing review of its overall
position, its reserving techniques and reinsurance recoverable.
In each of these areas of exposure, Travelers has endeavored to
litigate individual cases and settle claims on favorable terms.
Given the vagaries of court coverage decisions, plaintiffs'
expanded theories of liability, the risks inherent in major
litigation and other uncertainties, it is not presently possible
to quantify the ultimate exposure represented by these claims to
Travelers financial condition, results of operations or
liquidity. As a result, Travelers expects that future earnings
may be adversely affected by environmental and asbestos claims,
although the amounts cannot be reasonably estimated.
