SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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 1-9924
The Travelers Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1568099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
65 East 55th Street, New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212) 891-8900
(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
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date:
Common stock outstanding as of October 31, 1994: 320,411,829
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The Travelers Inc.
TABLE OF CONTENTS
-----------------
Part I - Financial Information
<S> <C>
Item 1. Financial Statements: Page No.
--------
Condensed Consolidated Statement of Income (Unaudited) -
Three and Nine Months Ended September 30, 1994 and 1993 3
Condensed Consolidated Statement of Financial Position -
September 30, 1994 (Unaudited) and December 31, 1993 4
Condensed Consolidated Statement of Changes in Stockholders' Equity
(Unaudited) - Nine Months Ended September 30, 1994 5
Condensed Consolidated Statement of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1994 and 1993 6
Notes to Condensed Consolidated Financial Statements - (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Part II - Other Information
Item 1. Legal Proceedings 29
Item 6. Exhibits and Reports on Form 8-K 29
Exhibit Index 30
Signatures 36
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2
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<CAPTION>
The Travelers Inc. and Subsidiaries
Condensed Consolidated Statement of Income (Unaudited)
(In millions of dollars, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
1994 1993 1994 1993
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Insurance premiums $1,973 $ 364 $ 5,967 $ 1,101
Commissions and fees 637 624 2,141 1,183
Net investment income 944 198 2,603 490
Finance related interest and other charges 263 239 761 706
Principal transactions 227 185 646 345
Asset management fees 182 126 545 202
Equity in income of old Travelers - 52 - 128
Other income 488 228 1,421 447
-------------------------------------------------------------------------------------------------------------
Total revenues 4,714 2,016 14,084 4,602
-------------------------------------------------------------------------------------------------------------
Expenses
Policyholder benefits and claims 2,005 208 6,070 618
Non-insurance compensation and benefits 782 640 2,434 1,248
Insurance underwriting, acquisition and operating 644 121 1,943 381
Interest 358 185 875 500
Provision for credit losses 35 28 112 95
Other operating 388 394 1,120 696
-------------------------------------------------------------------------------------------------------------
Total expenses 4,212 1,576 12,554 3,538
-------------------------------------------------------------------------------------------------------------
Gain on sale of stock of subsidiaries and affiliates - 7 - 13
-------------------------------------------------------------------------------------------------------------
Income before income taxes, minority interest and
cumulative effect of changes in accounting principles
502 447 1,530 1,077
Provision for income taxes 170 182 538 406
-------------------------------------------------------------------------------------------------------------
Income before minority interest and cumulative
effect of changes in accounting principles 332 265 992 671
Minority interest, net of income taxes - (6) - (18)
Cumulative effect of changes in accounting principles,
net of income taxes - - - (35)
-------------------------------------------------------------------------------------------------------------
Net income $ 332 $ 259 $ 992 $ 618
=============================================================================================================
Net income per share of common stock
and common stock equivalents:
Before cumulative effect of changes
in accounting principles $0.97 $1.03 $2.88 $2.69
Cumulative effect of changes in accounting principles - - - (0.15)
-------------------------------------------------------------------------------------------------------------
Net income per share of common stock
and common stock equivalents $0.97 $1.03 $2.88 $2.54
=============================================================================================================
Weighted average number of common shares outstanding
and common stock equivalents 321.0 244.3 323.2 235.4
=============================================================================================================
See Notes to Condensed Consolidated Financial Statements.
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3
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<CAPTION>
The Travelers Inc. and Subsidiaries
Condensed Consolidated Statement of Financial Position
(In millions of dollars, except per share amounts)
September 30, December 31,
1994 1993
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets (Unaudited)
Cash and cash equivalents
(including $811 and $914 segregated under federal and other regulations) $ 1,208 $ 1,526
Investments and real estate held for sale:
Fixed maturities:
Available for sale (1994, cost - $28,976; 1993, market - $28,438) 27,183 28,109
Held to maturity (market $101 and $201) 101 177
Equity securities, at market (cost $541 and $513) 555 555
Mortgage loans 5,832 7,365
Real estate held for sale 467 1,049
Policy loans 1,586 1,367
Short-term and other 4,023 3,577
-------------------------------------------------------------------------------------------------------------------
Total investments and real estate held for sale 39,747 42,199
-------------------------------------------------------------------------------------------------------------------
Securities borrowed or purchased under agreements to resell 26,656 13,353
Brokerage receivables 7,752 8,167
Trading securities owned, at market value 7,393 5,863
Net consumer finance receivables 6,615 6,216
Reinsurance recoverables 5,254 4,999
Value of insurance in force and deferred policy acquisition costs 2,137 1,996
Cost of acquired businesses in excess of net assets 2,114 2,162
Separate and variable accounts 4,760 4,665
Other receivables 4,553 4,624
Other assets 8,191 5,590
-------------------------------------------------------------------------------------------------------------------
Total assets $116,380 $101,360
===================================================================================================================
Liabilities
Investment banking and brokerage borrowings $ 3,735 $ 3,454
Short-term borrowings 2,905 2,535
Long-term debt 6,793 6,991
Securities loaned or sold under agreements to repurchase 21,544 10,144
Brokerage payables 7,554 7,012
Trading securities sold not yet purchased, at market value 5,850 3,835
Contractholder funds 16,813 17,980
Insurance policy and claims reserves 27,313 26,651
Separate and variable accounts 4,730 4,642
Accounts payable and other liabilities 10,322 8,680
-------------------------------------------------------------------------------------------------------------------
Total liabilities 107,559 91,924
-------------------------------------------------------------------------------------------------------------------
ESOP Preferred stock - Series C 235 235
Guaranteed ESOP obligation (97) (125)
-------------------------------------------------------------------------------------------------------------------
138 110
-------------------------------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock at aggregate liquidation value 800 800
Common stock ($.01 par value; authorized shares: 500 million
issued shares: 1994 - 368,218,947 shares and 1993 - 368,287,709 shares) 4 4
Additional paid-in capital 6,655 6,566
Retained earnings 3,933 3,140
Treasury stock, at cost (1994 - 45,793,941 shares, 1993 - 41,155,405 shares) (1,359) (1,121)
Unrealized gain (loss) on investment securities and other (1,350) (63)
-------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 8,683 9,326
-------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $116,380 $101,360
===================================================================================================================
See Notes to Condensed Consolidated Financial Statements.
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4
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The Travelers Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited)
(In millions of dollars, except per share amounts)
Nine months ended September 30, 1994 Amount Shares
-----------------------------------------------------------------------------------------------------------------
Preferred Stock at aggregate liquidation value (in thousands)
<S> <C> <C>
Balance, beginning of year $ 800 11,200
-----------------------------------------------------------------------------------------------------------------
Balance, end of period 800 11,200
=================================================================================================================
Common Stock and Additional Paid-In Capital
Balance, beginning of year 6,570 368,287
Issuance of shares pursuant to employee benefit plans 89 -
Other - (68)
-----------------------------------------------------------------------------------------------------------------
Balance, end of period 6,659 368,219
-----------------------------------------------------------------------------------------------------------------
Retained Earnings
Balance, beginning of year 3,140
Net income 992
Common dividends (135)
Preferred dividends (64)
-----------------------------------------------------------------------------------------------------------------
Balance, end of period 3,933
-----------------------------------------------------------------------------------------------------------------
Treasury Stock (at cost)
Balance, beginning of year (1,121) (41,155)
Issuance of shares pursuant to employee benefit plans, net of shares
tendered for payment of option exercise price and withholding taxes 110 5,204
Treasury stock acquired (345) (9,781)
Other (3) (62)
-----------------------------------------------------------------------------------------------------------------
Balance, end of period (1,359) (45,794)
-----------------------------------------------------------------------------------------------------------------
Unrealized Gain (Loss) on Investment Securities and Other
Balance, beginning of year (63)
Net change in unrealized gains and losses on investment securities (1,195)
Translation adjustments, net 3
Net issuance of restricted stock (192)
Restricted stock amortization 97
-----------------------------------------------------------------------------------------------------------------
Balance, end of period (1,350)
-----------------------------------------------------------------------------------------------------------------
Total common stockholders' equity and common shares outstanding $7,883 322,425
=================================================================================================================
Total stockholders' equity $8,683
==============================================================================================
See Notes to Condensed Consolidated Financial Statements.
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5
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The Travelers Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In millions of dollars)
Nine months ended September 30, 1994 1993
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Income before income taxes, minority interest and cumulative effect of changes in
accounting principles $ 1,530 $ 1,077
Adjustments to reconcile income before income taxes, minority interest and cumulative effect of
changes in accounting principles to net cash provided by (used in) operating activities:
Amortization of deferred policy acquisition costs and value of insurance in force 617 221
Additions to deferred policy acquisition costs (758) (289)
Depreciation and amortization 258 78
Provision for credit losses 112 95
Undistributed equity earnings - (82)
Changes in:
Trading securities, net 485 3,922
Securities borrowed, loaned and repurchase agreements, net (1,903) (4,260)
Brokerage receivables net of brokerage payables 957 (385)
Insurance policy and claims reserves 662 106
Other, net (654) 1,228
-----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations 1,306 1,711
Income taxes paid (308) (235)
-----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 998 1,476
-----------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Consumer loans originated or purchased (2,137) (1,936)
Consumer loans repaid or sold 1,588 1,598
Purchases of fixed maturities and equity securities (6,586) (2,271)
Proceeds from sales of investments and real estate:
Fixed maturities and equity securities 2,953 2,129
Mortgage loans 307 4
Real estate and real estate joint ventures 825 -
Proceeds from maturities of investments:
Fixed maturities and equity securities 2,884 182
Mortgage loans 1,165 4
Other investments, primarily short-term, net (833) (650)
Payment for purchase of the Shearson Business - (1,296)
Payment for net clearing assets transferred - (536)
Business divestments - 120
Other, net (251) (133)
-----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (85) (2,785)
-----------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Dividends paid (199) (101)
Issuance of common stock - 329
Cash received from stock options 10 7
Treasury stock acquired (345) (2)
Stock tendered by employees for payment of withholding taxes (26) (59)
Issuance of long-term debt 650 2,583
Payments and redemptions of long-term debt (817) (330)
Net change in short-term borrowings (including investment banking and brokerage borrowings) 651 522
Contractholder fund deposits 1,663 -
Contractholder fund withdrawals (2,843) -
Other, net 25 7
-----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (1,231) 2,956
-----------------------------------------------------------------------------------------------------------------
Change in cash and cash equivalents (318) 1,647
Cash and cash equivalents at beginning of period 1,526 272
-----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,208 $1,919
-----------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 859 $ 457
=================================================================================================================
See Notes to Condensed Consolidated Financial Statements.
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6
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The Travelers Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions of dollars, except per share amounts)
1. Basis of Presentation
---------------------
The accompanying condensed consolidated financial statements
as of September 30, 1994 and for the three and nine-month
periods ended September 30, 1994 and 1993 are unaudited and
include the accounts of The Travelers Inc. (the Company) and
its subsidiaries. Results of operations for the three-month
and nine-month periods ended September 30, 1993 relate only
to Primerica Corporation (Primerica), and do not include
earnings related to the acquisition of the approximately 73%
of The Travelers Corporation (old Travelers) common stock
acquired in December 1993. The earnings related to the
domestic retail brokerage and asset management businesses
(the Shearson Businesses) of Shearson Lehman Brothers
Holdings Inc. have been included since the date of
acquisition (July 31, 1993). In the opinion of management,
all adjustments, consisting of normal recurring adjustments
necessary for a fair presentation, have been reflected. 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 to Stockholders for the year ended December 31, 1993.
Certain financial information that is normally included in
annual financial statements prepared in accordance with
generally accepted accounting principles but is not required
for interim reporting purposes has been condensed or omitted.
Certain reclassifications have been made to prior years'
financial statements to conform to the current year's
presentation.
FAS 115. Effective January 1, 1994, the Company adopted
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," which addresses accounting and reporting for
investments in equity securities that have a readily
determinable fair value and for all debt securities. Debt
securities that the Company has the positive intent and
ability to hold to maturity have been classified as "held to
maturity" and have been reported at amortized cost.
Investment securities that are not classified as "held to
maturity" have been classified as "available for sale" and
are reported at fair value, with unrealized gains and losses,
net of income taxes, charged or credited directly to
stockholders' equity. Initial adoption of this standard
resulted in a net increase of $214 (net of taxes) to net
unrealized gains on investment securities which is included
in stockholders' equity.
Interpretation 39. Effective January 1, 1994, the Company
adopted Financial Accounting Standards Board Interpretation
No. 39, "Offsetting of Amounts Related to Certain Contracts"
(Interpretation 39). The general principle of Interpretation
39 states that amounts due from and due to another party may
not be offset in the balance sheet unless a right of setoff
exists and the parties intend to exercise the right of
setoff. Implementation of Interpretation 39 did not have a
material impact on the Company's financial position; however,
assets and liabilities were increased by approximately $4,000
at September 30, 1994. On September 30, 1994, the Financial
Accounting Standards Board issued a draft modification to
Interpretation 39 which, if enacted, could substantially
mitigate the increase in the Company's gross assets and
liabilities resulting from the implementation of
Interpretation 39.
7
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Notes to Condensed Consolidated Financial Statements
(continued)
2. Business Acquisitions
----------------------
The Travelers Merger
On December 31, 1993, Primerica acquired the approximately
73% of old Travelers common stock it did not already own.
Old Travelers was merged into Primerica, and concurrently,
Primerica changed its name to The Travelers Inc.
The Shearson Acquisition
On July 31, 1993, the Company acquired the Shearson
Businesses and combined them with the operations of Smith
Barney, Harris Upham & Co. Incorporated. The combined firm
is named Smith Barney Inc., and is a subsidiary of Smith
Barney Holdings Inc. (Smith Barney). In connection with this
acquisition, Smith Barney has agreed to pay additional
amounts that are contingent upon the new unit's performance.
The contingent consideration will be accounted for
prospectively, as additional purchase price, which will
result in amortization over periods of up to 20 years. As a
result of the acquisition of the Shearson Businesses, the
Company recorded a $65 after-tax provision in the third
quarter of 1993 for expenses related to the merger. This
provision is not reflected in the pro forma information
below.
The unaudited pro forma condensed results of operations
presented below assume the above transactions had occurred at
the beginning of the period presented:
Nine months
Pro Forma ended
September 30,
1993
Revenues $13,944
======
Income before cumulative effect of
changes in accounting principles $989
===
Net income $954
===
Net income per share:
Before cumulative effect of changes in
accounting principles $2.85
====
Net income $2.74
====
The unaudited pro forma condensed financial information is
not necessarily indicative either of the results of
operations that would have occurred had these transactions
been consummated at the beginning of the period presented or
of future operations of the combined companies.
Supplemental Information to the Condensed Consolidated
Statement of Cash Flows
Noncash investing and financing transactions relating to the
acquisition of the Shearson Businesses that is not reflected in
the Condensed Consolidated Statement of Cash Flows is as
follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1993
------------------
<S> <C>
Fair value of assets acquired, excluding cash acquired $ 4,811
Liabilities assumed (2,779)
Issuance of notes (586)
Equity securities issued (150)
-----
Cash payment $1,296
=====
</TABLE>
8
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Notes to Condensed Consolidated Financial Statements (continued)
3. Debt
----
Investment banking and brokerage borrowings consisted of the
following:
September 30, 1994 December 31, 1993
------------------ -----------------
Commercial paper $2,458 $1,401
Secured borrowings 27 105
Unsecured borrowings 817 693
Notes to LBI 433 1,255
----- -----
$3,735 $3,454
===== =====
Investment banking and brokerage borrowings are short-term
and include commercial paper, secured and unsecured bank
loans used to finance Smith Barney's operations, including
the securities settlement process, and notes issued to Lehman
Brothers Holdings Inc. (LBI) in connection with the Shearson
Businesses acquired. The secured and unsecured bank loans
bear interest at fluctuating rates based primarily on the
federal funds interest rate. Notes payable to LBI at
September 30, 1994 represent a non-interest bearing note (the
Clearing Note) outstanding in connection with LBI's
activities under the Clearing Agreement. The Clearing Note,
which matures upon termination of the Clearing Agreement,
fluctuates daily based on LBI's borrowing activities. Notes
payable to LBI at December 31, 1993 also included a $586
variable rate note which was issued as partial payment for
the businesses acquired and was repaid in January 1994. In
1993, Smith Barney put in place a commercial paper program
that consists of both discounted and interest bearing paper
and is currently authorized up to $2,500. In addition, Smith
Barney has substantial borrowing arrangements consisting of
facilities that it has been advised are available, but where
no contractual lending obligation exists.
Short-term borrowings consisted of commercial paper
outstanding as follows:
September 30, 1994 December 31, 1993
------------------ -----------------
The Travelers Inc. $ 308 $ 329
Commercial Credit
Company 2,491 2,206
The Travelers Insurance
Company 106 -
------- ------
$2,905 $2,535
===== =====
The Travelers Inc. (the Parent), Commercial Credit Company
(CCC) and The Travelers Insurance Company (TIC) issue
commercial paper directly to investors. Each maintains unused
credit availability under its respective bank lines of credit
at least equal to the amount of its outstanding commercial
paper. Each may borrow under its revolving credit facilities
at various interest rate options and compensates the banks for
the facilities through commitment fees.
During the third quarter of 1994 the Parent, CCC and TIC
entered into an agreement with a syndicate of banks to provide
$1,500 of revolving credit, to be allocated to any of the
Parent, CCC or TIC. The participation of TIC in this
agreement is limited to $300. The revolving credit facility
consists of a 364-day revolving credit facility in the amount
of $300 and a 5-year revolving credit facility in the amount
of $1,200. At September 30, 1994, $650 was allocated to the
Parent, $650 was allocated to CCC and $200 was allocated to
TIC. Under this facility the Company is required to maintain
a certain level of consolidated stockholders' equity (as
defined in the agreement). At September 30, 1994, the Company
exceeded this requirement by approximately $2,700.
9
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Notes to Condensed Consolidated Financial Statements (continued)
At September 30, 1994, CCC also had committed and available
revolving credit facilities on a stand alone basis of $2,360,
of which $860 expires in 1995 and $1,500 expires in 1997.
CCC is limited by covenants in its revolving credit agreements
as to the amount of dividends and advances that may be made to
the Parent or its affiliated companies. At September 30,
1994, CCC would have been able to remit $150 to the Parent
under its most restrictive covenants or regulatory
requirements.
Long-term debt, including its current portion, consisted of
the following:
September 30, 1994 December 31, 1993
------------------ -----------------
The Travelers Inc. $1,379 $1,504
Commercial Credit
Company 3,926 3,970
Smith Barney
Holdings Inc. 1,400 1,375
The Travelers
Insurance Group Inc. 88 142
----- -----
$6,793 $6,991
===== =====
During the third quarter of 1994 CCC issued $200 of 7 7/8% notes
due July 15, 2004. During the first quarter of 1994, Smith
Barney issued $200 of 5 1/2% Notes due January 15, 1999 and $200
of 6% Notes due March 15, 1997.
On May 31, 1994, Smith Barney renegotiated its three-year
revolving credit agreement (the "Agreement") with a bank
syndicate. The amendment to the Agreement extended the term
by one year until May 1997 and increased the amount of the
facility from $625 to $1,000. As of September 30, 1994, $400
was borrowed under the Agreement. In addition, on May 31,
1994, Smith Barney entered into a $750, 364-day revolving
credit agreement with a bank syndicate. As of September 30,
1994, there were no borrowings outstanding under this new
facility.
Smith Barney is limited by covenants in its revolving credit
facility as to the amount of dividends that may be paid to
the Parent. At September 30, 1994, Smith Barney would have
been able to remit approximately $475 to the Parent under its
most restrictive covenants.
Under Connecticut statutory standards, the statutory surplus
of The Travelers Insurance Group Inc., which amounted to
$4,109 at December 31, 1993, is not available in 1994 for
dividends to the Parent without prior approval.
4. Reinsurance
-----------
The Company's insurance operations cede insurance in order to
limit losses, reduce exposure on large risks, provide
additional capacity for future growth, and effect business
sharing arrangements. Life reinsurance is accomplished
through various plans of reinsurance, primarily coinsurance,
modified coinsurance and yearly renewable term. Property-
casualty reinsurance is placed on both a quota-share and
excess basis. Reinsurance ceded arrangements do not
discharge the insurance subsidiaries or the Company as the
primary insurer. Reinsurance amounts included in the
Condensed Consolidated Statement of Income were as follows:
10
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Notes to Condensed Consolidated Financial Statements (continued)
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<CAPTION>
Ceded to
Gross Other Net
Amount Companies Amount
------ --------- ------
<S> <C> <C> <C>
Three months ended September 30, 1994
-------------------------------------
Premiums
Life insurance $ 489 $ (86) $ 403
Accident and health insurance 627 (27) 600
Property and casualty insurance 1,346 (376) 970
----- ---- -----
$2,462 $(489) $1,973
===== ==== =====
Claims $1,843 $(342) $1,501
===== ==== =====
Three months ended September 30, 1993
-------------------------------------
Premiums
Life insurance $291 $ (70) $221
Accident and health insurance 95 (16) 79
Property and casualty insurance 119 (55) 64
--- ---- ---
$505 $(141) $364
=== ==== ===
Claims $286 $ (89) $197
=== ==== ===
Nine months ended September 30, 1994
------------------------------------
Premiums
Life insurance $1,414 $ (224) $1,190
Accident and health insurance 1,932 (73) 1,859
Property and casualty insurance 4,033 (1,115) 2,918
----- ------ -----
$7,379 $(1,412) $5,967
===== ====== =====
Claims $5,676 $ (1,001) $4,675
===== ======== =====
Nine months ended September 30, 1993
------------------------------------
Premiums
Life insurance $ 873 $(206) $ 667
Accident and health insurance 281 (38) 243
Property and casualty insurance 341 (150) 191
----- ---- -----
$1,495 $(394) $1,101
===== ==== =====
Claims $ 801 $(220) $ 581
===== ==== =====
</TABLE>
11
<PAGE>
Notes to Condensed Consolidated Financial Statements (continued)
5. Contingencies
-------------
A subsidiary of old Travelers is in litigation with certain
underwriters at Lloyd's in New York state court to enforce
reinsurance contracts with respect to recoveries for certain
asbestos claims. The dispute involves the ability of old
Travelers to aggregate asbestos products claims with asbestos
premises claims under a market agreement between Lloyd's and
old Travelers or under the applicable reinsurance treaties.
In January 1994, the court stayed litigation of this matter
in favor of arbitration of the contract issues raised by old
Travelers under the applicable treaties and an agreement with
the Lloyd's market on coverage for asbestos-related claims.
On insurance contracts written many years ago by old
Travelers, the Company continues to receive claims asserting
alleged injuries and damages from asbestos and other
hazardous and toxic substances. In relation to these claims,
the Company carries on a continuing review of its overall
position, its reserving techniques and reinsurance
recoverable. In each of these areas of exposure, the Company
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 or a range of possible
loss. As a result, the Company expects that future earnings
in any given year may be adversely affected by environmental
and asbestos claims, although the amounts cannot be
reasonably estimated. However, it is not likely these claims
will have a material adverse effect on the Company's
financial condition or liquidity.
In the ordinary course of business the Company and/or its
subsidiaries are also defendants or co-defendants in various
litigation matters, other than environmental and asbestos
claims. Although there can be no assurances, 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 the Company's
results of operations, financial condition or liquidity.
6. Pending Transactions
--------------------
On September 1, 1994 TIC and Metropolitan Life Insurance
Company (MetLife) signed a definitive agreement to combine
their group medical insurance businesses into a new company
with a long-term, strategic focus on managed care. If the
transactions take place, the new company is expected to be
one of the largest commercial health insurers in the United
States. The Company and MetLife will each own an equal
interest in the new company, which has been named The
MetraHealth Companies, Inc. Also on September 1, 1994, TIC
and MetLife entered into a definitive agreement for MetLife
to purchase TIC's group life and related group insurance
businesses, including group dental, vision, long-term
disability and long-term care, accidental death and
dismemberment and short-term disability coverages. Pending
state insurance and other regulatory approvals, both
transactions are expected to close around year end 1994. In
the event that these transactions are consummated, revenues
and earnings from the Managed Care and Employee Benefits
line, which amounted to $2,654 and $107 for the first nine
months of 1994, respectively, would no longer, for future
periods, be reflected in the Company's
12
<PAGE>
Notes to Condensed Consolidated Financial Statements (continued)
results of operations. Rather, the Company would reflect its
fifty percent interest in the new jointly owned company,
which will include both the Company's and MetLife's
healthcare businesses.
On August 24, 1994, the Company announced that it had agreed
to sell its subsidiary, American Capital Management &
Research, Inc. (ACMR), to The Van Kampen Merritt Companies,
Inc. (VKM). Under the terms of the transaction, VKM will
acquire the stock of ACMR from the Company for approximately
$430 in cash and further compensation of up to $10 based on
the achievement of certain performance criteria. An
investment fund managed by Clayton, Dubilier & Rice, Inc.
(CDR), the parent of VKM, will provide the bulk of the
equity financing for the transactions, and the Company will
purchase 4.9% of the outstanding common stock of the new
company for approximately $24 on the same terms and price as
the CDR investment. The Company may receive an option to
acquire up to 5% of additional equity. The transaction is
subject to obtaining the necessary financing, approval by the
shareholders of the Common Sense(R) Trust/Closed End and
American Capital funds. The transaction is expected to close
around the end of 1994, and is not expected to have a
material impact on future operations.
7. Subsequent Event
----------------
On October 18, 1994 The Travelers Indemnity Company, a
subsidiary of the Company, consummated the sale of its
subsidiary, Bankers and Shippers Insurance Company, to
Integon Corporation for $142 in cash. The sale involved the
non-standard personal automobile insurance lines, which was
the bulk of Bankers and Shippers business, and The Travelers
Indemnity Company retained the rest of the businesses. The
sale is not expected to have a material impact on future
operations.
13
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION
and RESULTS of OPERATIONS
Consolidated Results of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------------
(in millions, except per share amounts) 1994 1993 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $4,714 $2,016 $14,084 $4,602
===== ===== ====== =====
Income before cumulative
effect of changes
in accounting principles $332 $259 $992 $653
=== === === ===
Earnings per share:
Before cumulative
effect of changes
in accounting principles $0.97 $1.03 $2.88 $2.69
==== ==== ==== ====
Net income $0.97 $1.03 $2.88 $2.54
==== ==== ==== ====
Weighted average number of
common shares outstanding
and common stock equivalents 321.0 244.3 323.2 235.4
===== ===== ===== =====
</TABLE>
The Travelers Merger
On December 31, 1993, Primerica Corporation (Primerica) acquired
the approximately 73% of The Travelers Corporation (old
Travelers) common stock it did not already own (the Merger). Old
Travelers was merged into Primerica, and concurrently, Primerica
changed its name to The Travelers Inc. which, together with its
subsidiaries, is hereinafter referred to as the Company. The old
Travelers businesses acquired are hereinafter referred to as old
Travelers or The Travelers Insurance Group.
The Shearson Acquisition
On July 31, 1993, the Company acquired the domestic retail
brokerage and asset management businesses (the Shearson
Businesses) of Shearson Lehman Brothers Holdings Inc., a
subsidiary of American Express Company. The businesses acquired
were combined with the operations of Smith Barney, Harris Upham &
Co. Incorporated, and the combined firm is named Smith Barney
Inc., which is a subsidiary of Smith Barney Holdings Inc. (Smith
Barney).
Results of Operations
The discussion of results of operations for the three-month and
nine-month periods ended September 30, 1993 relates only to
Primerica (which excludes old Travelers and includes the Shearson
Businesses from July 31, 1993, the date of acquisition). The
assets and liabilities of old Travelers and the Shearson
Businesses are reflected in the Condensed Consolidated Statement
of Financial Position at December 31, 1993 on a fully
consolidated basis.
Income before cumulative effect of changes in accounting
principles for the quarter ended September 30, 1994 was $332
million compared to $259 million in the 1993 period. Included in
the 1993 period are reported after-tax investment portfolio gains
of $85 million, a $65 million after-tax provision for expenses
related to the merger of Smith Barney with the Shearson
Businesses, an after-tax gain of $4 million from the sale of
stock of subsidiaries and affiliates and a net charge of $8
million representing the cumulative effect, through June 30,
1993, of the tax rate increase to 35 percent, including the
Company's share of
14
<PAGE>
the net benefit of the tax rate increase to old Travelers of $9
million. There were no net portfolio gains or losses in the
1994 third quarter.
Excluding these items, earnings for the third quarter of 1994
increased by $89 million, or 37%, over the 1993 period,
reflecting primarily improved performance at Consumer Finance
Services and Primerica Financial Services and the inclusion of
the additional 73% interest in earnings of The Travelers
Insurance Group acquired on December 31, 1993, offset by
lower earnings at Smith Barney, and increased corporate expenses
primarily related to acquisitions.
Income before cumulative effect of changes in accounting
principles for the nine months ended September 30, 1994 was $992
million compared to $653 million in the 1993 period. Included in
the 1994 nine months are after-tax net portfolio gains of $5
million. Included in the 1993 nine months are reported after-tax
investment portfolio gains of $109 million, a $65 million after-
tax provision for expenses related to the merger of Smith Barney
with the Shearson Businesses, an after-tax gain of $8 million
from the sale of stock of subsidiaries and affiliates and a net
charge of $2 million representing the cumulative effect, through
December 31, 1992, of the tax rate increase to 35 percent,
including the Company's share of the benefit of the tax rate
increase to old Travelers of $11 million.
Excluding these items, earnings for the first nine months of 1994
increased by $384 million, or 64%, over the 1993 period,
reflecting primarily increased operating earnings from Smith
Barney (including nine months of earnings in 1994 and two months
of earnings in 1993 associated with the Shearson Businesses),
improved performance at Consumer Finance Services and Primerica
Financial Services and the inclusion of the additional 73%
interest in the earnings of The Travelers Insurance Group
acquired on December 31, 1993, offset by increased corporate
expenses primarily related to acquisitions.
Included in net income for the first nine months of 1993 is an
after-tax charge of $18 million resulting from the adoption of
Statement of Financial Accounting Standards No. 112 (FAS 112),
"Employers' Accounting for Postemployment Benefits," and an
after-tax charge of $17 million resulting from the adoption of
Statement of Financial Accounting Standards No. 106 (FAS 106),
"Employers' Accounting for Postretirement Benefits Other Than
Pensions."
The following discussion presents in more detail each segment's
performance.
<TABLE>
<CAPTION>
Segment Results for the Three Months Ended September 30, 1994 and 1993
----------------------------------------------------------------------
Investment Services
Three Months Ended September 30,
------------------------------------------------------
($ in millions) 1994 1993
-------------------------------------------------------------------------------------------------
Revenues Net income Revenues Net income
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Smith Barney(1) $1,371 $73 $1,074 $52
Mutual Funds and Asset Management(2) 38 9 39 5
-------------------------------------------------------------------------------------------------
Total Investment Services $1,409 $82 $1,113 $57
=================================================================================================
</TABLE>
(1) Net income for 1993 includes a $65 after-tax provision for
merger-related costs and an after-tax charge of $2 for the
cumulative effect of the tax rate increase through June 30,
1993.
(2) Net income for 1993 includes an after-tax charge of $3 for
the cumulative effective of the tax rate increase through
June 30, 1993.
15
<PAGE>
The Company's Investment Services segment includes Smith Barney -
investment banking and securities brokerage; American Capital
Management & Research, Inc. (American Capital) - mutual funds;
and a limited partnership interest in RCM Capital Management
(RCM) - asset management.
On August 24, 1994, the Company announced that it had agreed to
sell its subsidiary, American Capital Management & Research,
Inc., to The Van Kampen Merritt Companies, Inc. See Note 6 of
Notes to Condensed Consolidated Financial Statements.
Smith Barney
A difficult operating environment in the securities markets
combined with the effect of increased expenses related to the
acquisition of the Shearson Businesses contributed to a decline
in Smith Barney's earnings when compared to the corresponding
1993 period. Results for the 1993 period reflect the inclusion
of the Shearson Businesses for two months and a $65 million
after-tax provision for expenses related to the merger.
Smith Barney Revenues
Three Months Ended
September 30,
---------------------
($ in millions) 1994 1993
--------------------------------------------
Commissions $ 446 $407
Investment banking 161 200
Principal trading 227 185
Asset management
fees 182 109
Interest income, net* 79 66
Other income 48 29
--------------------------------------------
Net revenues* $1,143 $996
============================================
*Net of interest expense of $228 and $78 for the three-month
periods ended September 30, 1994 and 1993, respectively.
Revenues included in the condensed consolidated statement of
income are before deductions for interest expense.
Substantial increases were recorded in revenues from principal
trading and asset management fees and, to a lesser extent,
commissions, reflecting primarily the inclusion of the Shearson
Businesses for the full quarter versus two months last year.
Investment banking revenues, however, showed a significant
decline reflecting the lower new issue volume in the securities
markets generally.
Smith Barney experienced a marked increase in expenses,
particularly for investments in the systems, infrastructure,
research, trading and investment banking resources and staffing
needed to service a much greater number of Financial Consultants
as a result of the Shearson acquisition. The investment spending
in research, capital markets and investment banking has
essentially leveled off while the upgrade of systems and
infrastructure is continuing at a decelerating pace.
Earnings of $73 million also declined somewhat from the $79
million in the second quarter of 1994 on a slight decrease in
revenue.
Smith Barney's principal business activities are, by their
nature, highly competitive and subject to various risks,
particularly volatile trading markets and fluctuations in the
volume of market activity. While higher volatility can increase
risk, it can also increase order flow, which drives many of its
businesses. Other market and economic conditions, and the size,
number and timing of transactions may also impact
16
<PAGE>
net income. As a result, revenues and profitability can vary
significantly from year to year, and from quarter to quarter.
The increasing interest rate environment has adversely impacted
Smith Barney's businesses, primarily commissions and investment
banking.
Mutual Funds and Asset Management
Net income from the Company's mutual funds and asset management
operations in the third quarter of 1994 was about even with the
prior year period. American Capital's mutual fund sales (at net
asset value) were $529 million for the three month period ended
September 30, 1994, down from $754 million in the prior year
period.
Assets Under Management
<TABLE>
<CAPTION>
At September 30,
---------------------------------
($ in billions) 1994 1993
---------------------------------------------------------------------------------
<S> <C> <C>
Smith Barney $ 75.5 $73.7
RCM Capital Management 23.1 24.5
American Capital (1) 16.4 16.6
Travelers Life and Annuities (2) 19.8 -
---------------------------------------------------------------------------------
Total Assets Under Management $134.8 $114.8
=================================================================================
</TABLE>
(1) Includes the assets of the Common Sense(R) Trust, marketed by
Primerica Financial Services.
(2) Part of the Life Insurance Services segment.
Consumer Finance Services
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------------
($ in millions) 1994 1993
---------------------------------------------------------------------------------------
Revenues Net income Revenues Net income
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Finance Services(1) $313 $59 $321 $77
=======================================================================================
</TABLE>
(1) Net income for 1993 includes $23 of reported investment
portfolio gains.
The 10% increase in Consumer Finance net income in the third
quarter of 1994 over the same period last year (excluding the
investment portfolio gains) reflects continued growth in
receivables outstanding to $6.756 billion (before allowance for
losses and accrued interest receivable) at the end of the period.
This represents a 12% increase over September 30, 1993 and was marked
particularly by growth in personal loans. The average yield on
the portfolio declined to 15.49% from 15.91%, although net
margins rose to 8.86% from 8.49% in the year ago period. The
yield primarily reflects a shift in product mix toward more
variable rate loans, which have lower yields, with higher margins
reflecting lower funding costs.
Charge-offs reached a record low for the 1994 period -- 1.91%
versus 2.25% in the prior year quarter, while the 60+ day
delinquencies remained at historically low levels of 1.90% versus
2.21% in the prior year period.
17
<PAGE>
<TABLE>
<CAPTION>
As of, and for, the
Three Months Ended September 30,
-----------------------------------
1994 1993
-----------------------------------
<S> <C> <C>
Allowance for losses as % of net
consumer finance receivables 2.64% 2.64%
Charge-off rate 1.91% 2.25%
60 + days past due on a contractual
basis as % of gross consumer
finance receivables at quarter end 1.90% 2.21%
</TABLE>
Life Insurance Services
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------------------
($ in millions) 1994 1993
-----------------------------------------------------------------------------------------------------
Revenues Net income Revenues Net income
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primerica Financial Services(1) $ 319 $ 51 $360 $77
Travelers Life and Annuities(2) 547 62 82 13
Managed Care and Employee Benefits 864 40 - -
-----------------------------------------------------------------------------------------------------
Total Life Insurance Services $1,730 $153 $442 $90
=====================================================================================================
</TABLE>
(1) Net income for 1993 includes $45 of reported investment
portfolio gains and an after-tax charge of $12 for the
cumulative effect of the tax rate increase through June 30,
1993.
(2) Net income for 1993 includes $8 of reported investment
portfolio gains and an after-tax charge of $2 for the
cumulative effect of the tax rate increase through June 30,
1993.
The Life Insurance Services segment includes the results of
Primerica Financial Services (PFS) for both periods presented
and, for 1994 only, the results of the Travelers Life and
Annuities and the Managed Care and Employee Benefits segments of
old Travelers which were acquired on December 31, 1993. Certain
1993 production statistics related to old Travelers' businesses
are included for comparison purposes only and are not reflected
in 1993 revenues or operating results.
Travelers Life and Annuities consists principally of individual
products marketed under the Travelers name (which was the
Financial Services business of old Travelers) as well as group
annuity operations (which was the Asset Management & Pension
Services business of old Travelers) and in both periods the
accident and health operations of old Primerica.
Managed Care and Employee Benefits consists of the old Travelers
businesses that market group accident and health and life
insurance, managed health care programs, and administrative
services associated with employee benefit plans to customers
ranging from large multinational corporations to small local
employers.
Primerica Financial Services
During the third quarter of 1994 PFS issued 73,700 policies
totaling $13.8 billion in face amount of individual life
insurance, compared to 63,800 policies totaling $12.0 billion in
face amount in the corresponding 1993 period. Insurance in force
was $323.2 billion at September 30, 1994, up from
18
<PAGE>
$309.3 billion at December 31, 1993, reflecting positive sales
trends as well as better policy persistency. PFS's earnings are
significantly affected by the levels of insurance in force, and
it is likely that results would be negatively impacted in future
periods should insurance in force experience a substantial
decline.
PFS has traditionally offered mutual funds to customers as a way
for them to invest the savings obtained through relatively low
cost term life insurance as compared to traditional whole life
insurance. Sales of mutual funds during the third quarter of
1994 amounted to $304 million, compared to third quarter 1993
sales of $307 million. Assets under management in the
proprietary Common Sense(R) Trust family of funds reached $3.4
billion at September 30, 1994. Net receivables from $.M.A.R.T.
and S.A.F.E. consumer loans marketed through PFS were $1.04
billion at September 30, 1994, up 51% from $690 million at the
end of the prior year period, reflecting recent record levels of
new loan volume.
Travelers Life and Annuities
During the third quarter of 1994 Travelers Life and Annuities
operations issued $2.2 billion of face amount of individual life
insurance bringing total life insurance in force to $48.3
billion. Individual life insurance net written premiums and
deposits totaled $68 million during each of the third quarters of
1994 and 1993. Individual annuity production was strong during
the third quarter of 1994, compared to the prior period levels,
primarily reflecting increased sales of variable annuities. In
late June a variable annuity product was introduced for
distribution by Smith Barney financial consultants and is
expected to contribute to annuity production in future periods.
Net written premiums and deposits during the third quarter of
1994 totaled $327 million compared to $238 million in the
comparable 1993 period, bringing total policyholder account
balances and benefit reserves to $10.7 billion at the 1994
quarter end. Annuity sales activity has been helped by the
ratings upgrades that accompanied the merger of Primerica and old
Travelers. In the group annuity business, net written premiums
and deposits for the third quarter of 1994 were $131 million.
Group annuity net written premiums and deposits were down
significantly from the comparable period in 1993 reflecting the
Company's more selective approach to issuance of guaranteed
investment contracts and a decision in the third quarter of 1993
to no longer market index funds. Policyholder account balances
and benefit reserves totaled to $12.1 billion at September 30,
1994 down from $12.6 billion at June 30, 1994. Net written
premiums for individual accident and health products, primarily
long-term care and supplementary products, totaled $86 million in
the third quarter of 1994, about even with the 1993 period.
Managed Care and Employee Benefits
Net income for the Managed Care and Employee Benefits operations
reflects a decline in earned premiums partially offset by
reduced operating expenses resulting from restructuring
initiatives and improved underwriting.
Total group life insurance in force amounted to $134.4 billion at
September 30, 1994, down from $139.9 billion at year end 1993.
Face amount of group life insurance issued for the third quarter
1994 was $1.2 billion versus $1.7 billion in the 1993 period.
New business production in the health business also declined in
the quarter ended September 30, 1994, as compared to old
Travelers' 1993 third quarter. In the group life business, net
premiums written, deposits and equivalents totaled $139 million
for the quarter ended September 30, 1994 compared to $135 million
in the 1993 period. In the group health business, net premiums
written, deposits and equivalents were $2.2 billion for the
quarter ended September 30, 1994 compared to $2.4 billion in the
1993 period. Equivalents represent benefits under administration
which, together with deposits, are estimates of premiums that
fee-based customers would have been charged under a fully insured
arrangement and do not equal actual revenues. Total lives
covered by medical plans were 5.1 million, about even with second
quarter 1994 levels but down from 6.0 million in the 1993 period,
although participation in the managed care component rose 10%. These
declines reflect increased emphasis on improvements in underwriting
designed to reduce financial risk rather than emphasize growth.
19
<PAGE>
On September 1, 1994 Travelers Insurance Company (TIC), a
subsidiary of the Company, and Metropolitan Life Insurance Company
(MetLife) signed a definitive agreement to combine their group
medical insurance businesses into a new company with a long-term,
strategic focus on managed care. Also on September 1, 1994, TIC
and MetLife entered into a definitive agreement for MetLife to
purchase TIC's group life and related group insurance businesses,
including group dental, vision, long-term disability and long-term
care, accidental death and dismemberment and short-term disability
coverages. See Note 6 of Notes to Condensed Consolidated Financial
Statements.
Property & Casualty Insurance Services
<TABLE>
<CAPTION>
Three Months Ended September 30,
------------------------------------------------------------------
($ in millions) 1994 1993
--------------------------------------------------------------------------------------------------------------
Revenues Net income Revenues Net income
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial (1) $ 863 $50 $82 $14
Minority Interest - Gulf - - - (7)
Personal 398 37 - -
--------------------------------------------------------------------------------------------------------------
Total Property & Casualty Insurance
Services $1,261 $87 $82 $ 7
==============================================================================================================
</TABLE>
(1) Net income for 1993 includes $6 ($3 after minority interest)
of reported investment portfolio gains.
The Property & Casualty Insurance Services segment consists of
the business lines of old Travelers as well as Gulf Insurance
Group (Gulf). Segment revenues and operating results for 1993
include only the 50% of Gulf then owned by old Primerica.
Certain 1993 production statistics related to old Travelers'
businesses are included for comparison purposes only and are not
reflected in 1993 revenues or operating results.
Commercial Lines
Commercial Lines net written premiums and equivalents for the
third quarter of 1994 totaled $1.3 billion compared to $1.2
billion in the third quarter of 1993. A significant component of
Commercial Lines is the national accounts division, which
provides insurance coverages and services, primarily workers'
compensation, to large corporations. Equivalents associated
largely with national accounts, represent estimates of premiums
that customers would have been charged under a fully insured
arrangement and do not equal actual revenues. Although premiums
and equivalents combined were slightly higher than the year ago
period, net written premiums for national accounts for the third
quarter of 1994 totaled $127 million compared to $129 million in
the prior year period. This decline reflects an ongoing shift
from risk-bearing business into non risk-bearing business and
efforts to help customers control their loss costs.
Commercial Lines agency business serves small and mid-sized
businesses through brokers and approximately 2,500 independent
agents. Net written premiums declined 4% to $357 million, as
soft market conditions continued to affect guaranteed cost
business.
The combined ratio for Commercial Lines in the third quarter of
1994 was 113.2% compared to 186.8% in the 1993 period. The 1993
ratio reflects a $325 million pre-tax addition to reserves for
asbestos and environmental claims and litigation recorded by old
Travelers.
20
<PAGE>
Personal Lines
Net written premiums for the third quarter of 1994 were $355
million, compared to $328 million in the 1993 period and were
slightly lower than the first and second quarters of 1994.
Operating earnings continue to reflect strong growth in the
agency network in targeted markets and aggressive expense
reduction initiatives. Included in the third quarter of 1994 are
after-tax catastrophe losses of $1.7 million net of reinsurance.
The unit continues to actively manage and reduce its exposure to
windstorms and hurricanes. The quarter also included a favorable
resolution of the New Jersey Market Transition Facility (MTF)
deficit, which increased earnings by $9 million after tax.
The combined ratio for Personal Lines in the third quarter of
1994 was 97.2% compared to 104.4% in the 1993 period and 102.3%
in the 1994 second quarter. The improvement in the combined
ratio is attributable to the MTF resolution as well as overall
expense reductions.
On October 18, 1994 The Travelers Indemnity Company, a subsidiary
of the Company, consummated the sale of its subsidiary, Bankers
and Shippers Insurance Company, to Integon Corporation for $142
million in cash. See Note 7 of Notes to Condensed Consolidated
Financial Statements.
Corporate and Other
<TABLE>
<CAPTION>
Three Months Ended September 30,
------------------------------------------------------------------
($ in millions) 1994 1993
--------------------------------------------------------------------------------------------------------------
Net income Net income
Revenues (expense) Revenues (expense)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net expenses (1) $(49) $(13)
Equity in income of old Travelers (2) - 37
Gain on sales of stock of - 4
subsidiaries and affiliates
--------------------------------------------------------------------------------------------------------------
Total Corporate and Other $1 $(49) $58 $ 28
==============================================================================================================
</TABLE>
(1) Includes $3 of reported investment portfolio gains in 1993
and an after-tax benefit of $2 for the cumulative effect of
the tax rate increase through June 30, 1993.
(2) Includes $3 from the Company's share of Travelers' realized
portfolio gains in 1993 and an after-tax benefit of $9 for
the cumulative effect of the tax rate increase through June
30, 1993.
The increase in Corporate and Other net expenses for the third
quarter of 1994 is primarily attributable to the assumption by
the parent company of old Travelers corporate debt and certain
corporate expenses and increases in other interest costs to the
extent borne at the corporate level.
21
<PAGE>
Segment Results for the Nine Months Ended September 30, 1994 and
----------------------------------------------------------------
1993
----
The overall operating trends of the nine months ended September
30, 1994 and 1993 were substantially the same as those of the
third quarter periods except as noted below.
Investment Services
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------------------------------------
($ in millions) 1994 1993
--------------------------------------------------------------------------------------------------------------
Revenues Net income Revenues Net income
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Smith Barney(1) $4,109 $296 $2,013 $160
Mutual Funds and Asset Management(2) 118 25 114 22
--------------------------------------------------------------------------------------------------------------
Total Investment Services $4,227 $321 $2,127 $182
==============================================================================================================
</TABLE>
(1) Net income for 1993 includes a $65 after-tax provision for
merger related costs and an after-tax charge of $1 for the
cumulative effect of the tax rate increase through December
31, 1992.
(2) Net income for 1993 includes an after-tax charge of $2 for
the cumulative effect of the tax rate increase through
December 31, 1992.
Smith Barney's earnings increased significantly to $296 million
in the nine-month period ended September 30, 1994, which includes
the results of the Shearson Businesses. This compares to $226
million (before the provision for merger related costs) in the
prior year period which includes the Shearson Businesses for two
months.
Smith Barney Revenues
Nine Months Ended
September 30,
--------------------
($ in millions) 1994 1993(1)
-------------------------------------------
Commissions $1,516 $ 707
Investment banking 537 450
Principal trading 646 344
Asset management fees 545 153
Interest income, net* 223 128
Other income 141 45
-------------------------------------------
Net revenues* $3,608 $1,827
===========================================
(1) Includes Shearson Businesses for two months.
* Net of interest expense of $501 and $186 for the nine month
periods ended September 30, 1994 and 1993, respectively.
Revenues included in the condensed consolidated statement of
income are before deductions for interest expense.
22
<PAGE>
Consumer Finance Services
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------------------------------------
($ in millions) 1994 1993
--------------------------------------------------------------------------------------------------------------
Revenues Net income Revenues Net income
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Finance Services(1) $916 $166 $895 $177
==============================================================================================================
</TABLE>
(1) Net income for 1993 includes $23 of reported investment
portfolio gains.
Charge-offs remained at low levels for the first nine months of
1994 -- 2.08% versus 2.40% in the prior year period. The average
yield on the portfolio declined to 15.33% from 15.91%, although
net margins rose to 8.67%. This reflects a shift in product mix
toward more variable rate loans and lower funding costs.
Life Insurance Services
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------------------------------------
($ in millions) 1994 1993
--------------------------------------------------------------------------------------------------------------
Revenues Net income Revenues Net income
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primerica Financial Services (1) $ 959 $156 $ 957 $174
Travelers Life and Annuities (2) 1,634 157 248 35
Managed Care and Employee Benefits 2,654 107 - -
--------------------------------------------------------------------------------------------------------------
Total Life Insurance Services $5,247 $420 $1,205 $209
==============================================================================================================
</TABLE>
(1) Net income for 1993 includes $45 of reported investment
portfolio gains and an after-tax charge of $11 for the
cumulative effect of the tax rate increase through December
31, 1992.
(2) Net income for 1993 includes $17 of reported investment
portfolio gains and an after-tax charge of $1 for the
cumulative effect of the tax rate increase through December
31, 1992.
Primerica Financial Services
During the first nine months of 1994, PFS issued 221,600 policies
totaling $41.7 billion in face amount of individual life
insurance compared to 188,200 policies totaling $35 billion in
face amount in the corresponding 1993 period. Sales of mutual
funds during the first nine months of 1994 increased 11% to $1.04
billion, compared to sales of $940 million in the comparable
prior year period.
Travelers Life and Annuities
During the first nine months of 1994, Travelers Life and
Annuities operations issued $7.2 billion of face amount of
individual life insurance. Individual life insurance written
premiums and deposits for the first nine months of 1994 totaled
$201 million compared to $192 million in the year ago period.
Individual annuity production was strong during the first nine
months of 1994, compared to the prior period levels, reflecting
sales of variable annuities. Net written premiums and deposits
for the first nine months of 1994 totaled $944 million compared
to $737 million in the 1993 period. In the group annuity
business, net written premiums and deposits were $647 million in
the first nine months of 1994 down from $1.77 billion in the 1993
period reflecting the Company's more selective approach to
issuance of guaranteed investment contracts and a decision in the
third quarter of 1993 to no longer market index funds. Net
23
<PAGE>
written premiums for individual accident and health products,
primarily long-term care and supplementary products, totaled $253
million in the first nine months of 1994, about even with the
comparable 1993 period.
Managed Care and Employee Benefits
Face amount of group life insurance issued for the first nine
months of 1994 was $9.0 billion versus $10.9 billion in the 1993
period. New business production in the health business also
declined over old Travelers' 1993 first nine months. In the
group life business, net premiums written, deposits and
equivalents totaled $481 million for the first nine months of
1994 compared to $525 million in the comparable 1993 period. In
the group health business, net premiums written, deposits and
equivalents were $6.9 billion for the first nine months of 1994
compared to $7.4 billion in the comparable 1993 period. These
declines reflect increased emphasis on improvements in
underwriting designed to reduce financial risk rather than
emphasize growth, and uncertainties relating to the proposed
healthcare legislation.
Property & Casualty Insurance Services
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------------------------------------
($ in millions) 1994 1993
--------------------------------------------------------------------------------------------------------------
Net Net
Revenues income Revenues income
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial (1) $2,553 $149 $240 $38
Minority Interest - Gulf - - - (19)
Personal 1,150 73 - -
--------------------------------------------------------------------------------------------------------------
Total Property & Casualty Insurance Services $3,703 $222 $240 $ 19
==============================================================================================================
</TABLE>
(1) Net income for 1993 includes $15 ($8 after minority
interest) of reported investment portfolio gains.
Commercial Lines
Commercial Lines net written premiums and equivalents for the
first nine months of 1994 were $4.2 billion versus $4.1 billion
in the comparable 1993 period. Net written premiums and
equivalents for national accounts for the first nine months of
1994 totaled $2.0 billion, compared to $1.9 billion in the prior
year period.
Commercial Lines agency business net written premiums for the
first nine months of 1994 declined 3% to $1.16 billion, as growth
in industry-specific programs was more than offset by continued
soft market conditions. Included in the first nine months of
1994 are after-tax catastrophe losses of $28 million, net of
reinsurance. These losses were largely offset, however, by
favorable loss development in certain workers' compensation lines
and residual markets.
The combined ratio for Commercial Lines was 112.4% for the nine
months ended September 30, 1994, compared to 130.4% in the
comparable 1993 period. The 1993 combined ratio for old
Travelers reflects a $325 million pre-tax addition to reserves
for asbestos and environmental claims and litigation as well as
the effect of catastrophe losses in 1993 amounting to
approximately $30 million on a pre-tax basis.
24
<PAGE>
Personal Lines
Net written premiums for the first nine months of 1994 were $1.08
billion, compared to $1.01 billion in the 1993 period and reflect
strong growth in targeted regions as well as in the non-standard
auto market. Included in the 1994 period are $22.9 million of
catastrophe losses (after taxes and net of reinsurance) related
to the severe storms in the Northeast, which were partially
offset by favorable loss reserve development in 1994 on prior
years' business.
The combined ratio for Personal Lines for the nine month period
was 102.7% compared to 105.9% in the comparable 1993 period. The
1993 combined ratio for old Travelers reflects approximately $20
million of pre-tax catastrophe losses.
Corporate and Other
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------------------------------------
($ in millions) 1994 1993
--------------------------------------------------------------------------------------------------------------
Net income Net income
Revenues (expense) Revenues (expense)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net expenses (1) $(137) $(36)
Equity in income of old Travelers (2) - 94
Gain on sales of stock of
subsidiaries and affiliates - 8
--------------------------------------------------------------------------------------------------------------
Total Corporate and Other $(9) $(137) $135 $ 66
==============================================================================================================
</TABLE>
(1) Net expenses in 1993 include $3 of reported investment
portfolio gains and an after-tax benefit of $2 for the
cumulative effect of the tax rate increase through December
31, 1992.
(2) Includes $13 million from the Company's share of Travelers'
realized portfolio gains and an after-tax benefit of $11
million for the cumulative effect of the tax rate increase
through December 31, 1992.
The increase in Corporate and Other net expenses for the first
nine months of 1994 is primarily attributable to the assumption
by the parent company of old Travelers corporate debt and certain
corporate expenses and interest costs related to the July 1993
Shearson acquisition.
The 1993 net gain on sales of stock of subsidiaries and
affiliates resulted from the sale of the Company's remaining
interest in Fingerhut and PCF Acquisition Corporation.
Liquidity and Capital Resources
The Travelers Inc. (the Parent) services its obligations
primarily with dividends and other advances that it receives
from subsidiaries. The subsidiaries' dividend paying ability
is limited by certain covenant restrictions in bank and/or
credit agreements and/or by regulatory requirements. The Parent
believes it will have sufficient funds to meet current and
future commitments. Each of the Company's major operating
subsidiaries finances its operations on a stand-alone basis
consistent with its capitalization and ratings.
The Parent
The Parent issues commercial paper directly to investors and
maintains unused credit availability under committed revolving
credit agreements at least equal to the amount of commercial
paper outstanding.
25
<PAGE>
During the third quarter of 1994 the Parent, CCC and TIC entered
into an agreement with a syndicate of banks to provide $1.5
billion of revolving credit, to be allocated to any of the
Parent, CCC or TIC. The participation of TIC in this agreement is
limited to $300 million. The revolving credit facility consists
of a 364-day revolving credit facility in the amount of $300
million and a 5-year revolving credit facility in the amount of
$1.2 billion. At September 30, 1994, $650 million was allocated
to CCC and $200 million to TIC. Under this facility the
Company is required to maintain a certain level of consolidated
stockholders' equity (as defined in the agreement). At September
30, 1994 the Company exceeded this requirement by approximately
$2.7 billion.
As of September 30, 1994, the Parent had unused credit
availability of $650 million. The Parent may borrow under its
revolving credit facilities at various interest rate options and
compensates the banks for the facilities through commitment fees.
As of November 11, 1994, the Parent had $800 million available
for debt offerings under its shelf registration statement.
Commercial Credit Company (CCC)
CCC also issues commercial paper directly to investors and
maintains unused credit availability under committed revolving
credit agreements at least equal to the amount of commercial
paper outstanding. As of September 30, 1994, CCC had unused
credit availability of $3.01 billion. CCC may borrow under its
revolving credit facilities at various interest rate options and
compensates the banks for the facilities through commitment fees.
During 1994, CCC completed the following debt offerings and, as
of November 11, 1994, had $350 million available for debt
offerings under its shelf registration statement:
- 7 7/8% Notes due July 15, 2004 $200 million
- 8 1/4% Notes due November 1, 2001 $300 million
CCC is limited by covenants in its revolving credit agreements as
to the amount of dividends and advances that may be made to the
Parent or its affiliated companies. At September 30, 1994, CCC
would have been able to remit $150 million to the Parent under
its most restrictive covenants or regulatory requirements.
Smith Barney Holdings Inc. (Smith Barney)
Smith Barney funds its day to day operations through the use of
commercial paper, collateralized and uncollateralized bank
borrowings (both committed and uncommitted), internally generated
funds, repurchase transactions, and securities lending
arrangements. The volume of Smith Barney's borrowings generally
fluctuates in response to changes in the amount of reverse
repurchase transactions outstanding, the level of securities
inventories, customer balances and securities borrowing
transactions. On May 31, 1994, Smith Barney renegotiated its
three-year revolving credit agreement (the "Agreement") with a
bank syndicate. The amendment to the Agreement extended the term
by one year until May 1997 and increased the amount of the facility
from $625 million to $1 billion. As of September 30, 1994, $400
million was borrowed under the Agreement. In addition, on May
31, 1994, Smith Barney entered into a $750 million, 364-day
revolving credit agreement with a bank syndicate. As of
September 30, 1994 there were no borrowings outstanding under
this new facility. In addition, Smith Barney has substantial
borrowing arrangements consisting of facilities that it has been
advised are available, but where no contractual lending
obligation exists.
Smith Barney, through its subsidiary Smith Barney Inc., issues
commercial paper directly to investors. As a policy, Smith
Barney maintains sufficient borrowing power of unencumbered
securities to cover
26
<PAGE>
unsecured borrowings and unsecured letters of credit. In
addition, Smith Barney monitors its leverage and capital ratios
on a daily basis.
During 1994, Smith Barney completed the following debt offerings
and, as of November 11, 1994, had $800 million available for debt
offerings under its shelf registration statements (after giving
effect to its November 9, 1994 agreement to sell $50 million of
Medium-Term Notes):
- 5 1/2% Notes due January 15, 1999 $200 million
- 6% Notes due March 15, 1997 $200 million
- 7 7/8% Notes due October 1, 1999 $150 million
Smith Barney is limited by covenants in its revolving credit
facility as to the amount of dividends that may be paid to the
Parent. At September 30, 1994, Smith Barney would have been able
to remit approximately $475 million to the Parent under its most
restrictive covenants.
The Travelers Insurance Group
At September 30, 1994, The Travelers Insurance Group had $23.5
billion of life and annuity product deposit funds and reserves.
Of that total, $11.6 billion are not subject to discretionary
withdrawal based on contract terms. The remaining $11.9 billion
are for life and annuity products that are subject to
discretionary withdrawal by the contractholder. Included in the
amount that is subject to discretionary withdrawal is $2.1
billion of liabilities that are surrenderable with market value
adjustments. An additional $5.7 billion of the life insurance
and individual annuity liabilities, subject to discretionary
withdrawal, have an average surrender charge of 5.6% and $1.4
billion of liabilities are surrenderable at book value over 5 to
10 years. In the payout phase, these funds are credited at
significantly reduced interest rates. The remaining $2.7 billion
of liabilities are surrenderable without charge. More than half
of these relate to individual life products. These risks would
have to be underwritten again if transferred to another carrier,
which is considered a significant deterrent against withdrawal by
long-term policyholders. Insurance liabilities that are
surrendered or withdrawn from The Travelers Insurance Group are
reduced by outstanding policy loans and related accrued interest
prior to payout.
The Travelers Insurance Company (TIC), a direct subsidiary of The
Travelers Insurance Group Inc., issues commercial paper to
investors and maintains unused committed, revolving credit
facilities at least equal to the amount of commercial paper
outstanding. As of September 30, 1994, TIC has unused credit
availability of $200 million.
Under Connecticut statutory standards, the statutory surplus of
The Travelers Insurance Group, which amounted to $4.1 billion at
December 31, 1993, is not available in 1994 for dividends to the
Parent without prior approval.
Investment Portfolio and Real Estate Held for Sale
The Company's investment portfolio consists primarily of fixed
income investments with an average quality rating of A1. The
average duration of the fixed income portfolio, including short-
term fixed income investments, is 4.7 years.
The mortgage loans and real estate held for sale that comprise a
large part of the portfolio supporting the Company's "Travelers
Life and Annuities" segment are down to $6.3 billion at September
30, 1994 versus $8.4 billion at year-end 1993. Underperforming
mortgages and real estate accounted for $1.3 billion of the total
at September 30, 1994, down from $2.5 billion at year-end 1993.
The Company is continuing to maintain a brisk program of real
estate sales. Proceeds from the sales of real estate, real
estate joint ventures, and mortgage loans (including discounted
payoffs) during the first nine months of 1994 amounted to $1.229
billion of which $1.132 billion was in cash.
27
<PAGE>
Accounting Standards Not Yet Adopted
FAS 114 and FAS 118
Statement of Financial Accounting Standards No. 114, "Accounting
by Creditors for Impairment of a Loan," and Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures,"
describe how impaired loans should be measured when determining
the amount of a loan loss accrual. These Statements also amend
existing guidance on the measurement of restructured loans in a
troubled debt restructuring involving a modification of terms.
The ultimate impact, if any, of implementing these Statements
will depend on market conditions and the composition of the
Company's loan portfolio at the date of implementation and thus
the Company has not yet determined the impact, if any, these
Statements will have on its financial statements. The Statements
have an effective date of January 1, 1995.
FAS 119
In October 1994, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (Statement)
No. 119, "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments." This Statement amends FASB
Statement No. 105, "Disclosure of Information about Financial
Instruments with Off-Balance-Sheet Risk and Financial Instruments
with Concentrations of Credit Risk" and FASB Statement No. 107,
"Disclosures about Fair Value of Financial Instruments" and
provides specific disclosure requirements for derivative
financial instruments. This statement is effective for financial
statements issued for fiscal years ending after December 15,
1994.
28
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
For information concerning purported class actions and an
individual action that had been filed against Smith Barney Inc.
("SBI") and others in connection with Worlds of Wonder common
stock and convertible debentures, see the description that
appears in the first three paragraphs of page 31 of the Company's
filing on Form 10-K for the year ended December 31, 1989, and the
description that appears in the first paragraph of page 30 of the
Company's filing on Form 10-K for the year ended December 31,
1990, which descriptions are incorporated by reference herein. A
copy of the pertinent paragraph of such filing is included as an
exhibit to this Form 10-Q. The individual action was dismissed
in May 1992. In January 1993, summary judgment was granted for
SBI and the other defendants in the class action. The
U.S. Court of Appeals for the Ninth Circuit affirmed the grant of
summary judgment in August 1994.
A number of cases have been filed against subsidiaries of
the Company, other insurance companies and industry organizations
relating to service fee charges and premium calculations on certain
workers compensation insurance. Subsidiaries of the Company are
defendants in an action filed by the Attorney General of South
Carolina in August 1994 in the Court of Common Pleas, County of
Greenville, South Carolina, and a purported class action filed in
September 1994 in the Circuit Court for Bullock County, Alabama.
Certain of the Company's subsidiaries have also been named as
defendants in a purported class action filed in 1993 in the Superior
Court Division of the General Court of Justice, Wake County, North
Carolina, and, in April 1994, were named as additional defendants
in a purported class action pending in the 116th District Court of
Dallas County, Texas. The plaintiffs in these cases generally allege
that the workers compensation carriers in the state have
conspired to collect excessive or improper service fees or
premiums in violation of state antitrust laws and/or state unfair
trade practices laws. The plaintiffs seek monetary damages and
possible injunctive relief. The Company believes it has
meritorious defenses and intends to contest the allegations.
Certain additional information regarding legal proceedings
to which subsidiaries of the Company are parties, or to which any
of their property is subject, is described in the periodic
reports filed under the Securities Exchange Act of 1934, as
amended, by certain subsidiaries of the Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
See Exhibit Index.
(b) Reports on Form 8-K:
On September 26, 1994, the Company filed a Current Report on
Form 8-K, dated September 26, 1994, reporting under Item 5
thereof certain information regarding pending transactions and
certain additional information regarding derivative financial
instruments used by Smith Barney Holdings Inc.
No other Current Reports on Form 8-K were filed during the
quarter ended September 30, 1994.
29
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.01 Employment Protection Agreement, dated as of
December 31, 1987, between The Travelers Inc.
(the "Company") (as successor to Commercial
Credit Company ("CCC")), and Sanford I. Weill,
incorporated by reference to Exhibit 10.03 to
CCC's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987 (File No.
1-6594).
10.02.1 Stock Option Plan of the Company, as amended
through April 26, 1989, incorporated by
reference to Annex A to the prospectus
contained in the Company's Registration
Statement on Form S-8 (No. 33-29711).
10.02.2 Amendment to the Company's Stock Option
Plan, dated October 23, 1991, incorporated
by reference to Exhibit 10.02.2 to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991 (File
No. 1-9924) (the "Company's 1991 10-K").
10.02.3 Amendments to the Company's Stock Option
Plan, approved by the Company's stockholders
on April 22, 1992, incorporated by reference
to Exhibit 10.02.3 to the Company's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1992 (File No.1-9924)
(the "Company's 1992 10-K").
10.02.4 Amendment to the Company's Stock Option
Plan, dated July 22, 1992, incorporated by
reference to Exhibit 10.02.4 to the
Company's 1992 10-K.
10.02.5 Amendment No. 11 to the Company's Stock Option Plan,
incorporated by reference to Exhibit 10.02.5
to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 (File No. 1-9924)
(the "Company's 1993 10-K").
10.02.6 Amendment No. 12 to the Company's Stock Option Plan,
incorporated by reference to Exhibit 10.02.6 to the
Company's 1993 10-K.
10.03 Retirement Benefit Equalization Plan of the
Company (as successor to Primerica Holdings,
Inc.), as amended, incorporated by reference to
Exhibit 10.03 to the Company's 1993 10-K.
30
<PAGE>
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.04 Letter Agreement between Joseph A. Califano,
Jr. and the Company, dated December 14,
1988, incorporated by reference to Exhibit
10.21.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December
31, 1988 (File No. 1-9924) (the "Company's
1988 10-K").
10.05.1 The Company's Deferred Compensation Plan for
Directors, incorporated by reference to
Exhibit 10.21.2 to the Company's 1988 10-K.
10.05.2 Amendment to the Company's Deferred
Compensation Plan for Directors, dated July
22, 1992, incorporated by reference to
Exhibit 10.06.2 of the Company's 1992 10-K.
10.06.1 Supplemental Retirement Plan of the Company,
incorporated by reference to Exhibit 10.23
to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990
(File No. 1-9924) (the "Company's 1990 10-K").
10.06.2 Amendment to the Company's Supplemental Retirement Plan,
incorporated by reference to Exhibit 10.06.2
to the Company's 1993 10-K.
10.07 Long-Term Incentive Plan of the Company, as
amended, incorporated by reference to
Exhibit 10.08 to the Company's 1992 10-K.
10.08.1 Capital Accumulation Plan of the Company
(the "CAP Plan"), as amended to January 31,
1993, incorporated by reference to Exhibit
10.09 to the Company's 1992 10-K.
10.08.2 Amendment No. 8 to the Company's CAP Plan, incorporated
by reference to Exhibit 10.08.2 to the
Company's 1993 10-K.
10.09 Agreement dated December 21, 1993 between
the Company and Edward H. Budd, incorporated
by reference to Exhibit 10.22 to the
Company's 1993 10-K.
31
<PAGE>
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.10 Restated Stockholder Rights and Support
Agreement dated as of November 1, 1989 by
and among the Company and Arthur L.
Williams, Jr., Angela H. Williams, A.L.
Williams & Associates, Inc. and The A.L.
Williams & Associates, Inc. Pension and
Profit Sharing Plan, incorporated by
reference to Exhibit 10.13 to the Company's
1990 10-K.
10.11 Amended and Restated Exclusive Marketing
Agreement dated as of November 1, 1989 by
and among the Company, A.L. Williams &
Associates, Inc. and Arthur L. Williams,
Jr., incorporated by reference to Exhibit
10.14 to the Company's 1990 10-K.
10.12 Restated Second Amended General Agency
Agreement ("SAGAA") dated as of November 1,
1989 by and among Primerica Life Insurance
Company (formerly Massachusetts Indemnity
Life Insurance Company; hereinafter
"Primerica Life"), A.L. Williams &
Associates, Inc. and Arthur L. Williams,
Jr., incorporated by reference to Exhibit
10.15 to the Company's 1990 10-K.
10.13 Restated First Amendment to SAGAA dated as
of November 1, 1989 by and among Primerica
Life, A.L. Williams & Associates, Inc. and
Arthur L. Williams, Jr., incorporated by
reference to Exhibit 10.16 to the Company's
1990 10-K.
10.14 Restated and Amended Agreement of Charles D.
Adams dated as of November 1, 1989 for the
benefit of each of the Company, A.L.
Williams & Associates, Inc. and The A.L.
Williams Corporation, incorporated by
reference to Exhibit 10.17 to the Company's
1990 10-K.
10.15 Restated and Amended Agreement of Angela H.
Williams dated as of November 1, 1989 for
the benefit of each of the Company, A.L.
Williams & Associates, Inc. and The A.L.
Williams Corporation, incorporated by
reference to Exhibit 10.18 to the Company's
1990 10-K.
32
<PAGE>
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.16.1 Asset Purchase Agreement dated as of March
12, 1993, by and among Shearson Lehman
Brothers Inc., Smith Barney Inc. ("SBI";
formerly Smith Barney, Harris Upham & Co.
Incorporated), the Company, American
Express Company and Shearson Lehman Brothers
Holdings Inc. (the "SLB Agreement"),
incorporated by reference to Exhibit 10.21
to the Company's 1992 10-K.
10.16.2 Amendment No. 1, dated as of July 31, 1993,
to the SLB Agreement, incorporated by
reference to Exhibit 10.01 to the Company's
Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1993 (File No. 1-
9924) (the "Company's June 30, 1993 10-Q").
10.16.3 Amendment No. 2 dated as of July 31, 1993,
to the SLB Agreement, incorporated by
reference to Exhibit 10.02 to the Company's
June 30, 1993 10-Q.
10.17.1 Employment Agreement dated June 23, 1993, by
and among SBI, the Company and Robert F.
Greenhill (the "RFG Employment Agreement"),
incorporated by reference to Exhibit 10.01
to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September
30, 1993 (File No. 1-9924) (the "Company's
September 30, 1993 10-Q").
10.17.2 Amendment to the RFG Employment Agreement,
incorporated by reference to Exhibit 10.17.2
to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 31,
1994 (File No. 1-9924).
10.18 Memorandum of Sale dated June 23, 1993,
between the Company and Robert F. Greenhill,
incorporated by reference to Exhibit 10.02
to the Company's September 30, 1993 10-Q.
10.19 Registration Rights Agreement dated June 23,
1993, between the Company and Robert F.
Greenhill, incorporated by reference to
Exhibit 10.03 to the Company's September 30,
1993 10-Q.
10.20 Restricted Shares Agreement dated June 23,
1993, by and between the Company and Robert
F. Greenhill, incorporated by reference to
Exhibit 10.04 to the Company's September 30,
1993 10-Q.
33
<PAGE>
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.21 Agreement and Plan of Merger, dated as of
September 23, 1993, between the Company and
The Travelers Corporation ("old Travelers"),
incorporated by reference to Exhibit 2.1 to
the Current Report on Form 8-K of old
Travelers, dated September 23, 1993 and
filed with the Commission on October 8, 1993
(File No. 1-5799).
10.22 Employment Agreement dated December 31, 1993
between The Travelers Insurance Group Inc.
and Robert W. Crispin, incorporated by reference
to Exhibit 10.24 to the Company's 1993 10-K.
10.23 The Travelers Corporation 1982 Stock Option
Plan, as amended January 10, 1992,
incorporated by reference to Exhibit 10(a)
to the Annual Report on Form 10-K of old
Travelers for the fiscal year ended December
31, 1991 (File No. 1-5799) (the "old
Travelers' 1991 10-K").
10.24 The Travelers Corporation 1988 Stock
Incentive Plan, as amended April 7, 1992,
incorporated by reference to Exhibit 10(b)
to the Annual Report on Form 10-K of old
Travelers for the fiscal year ended December
31, 1992 (File No. 1-5799) (the "old
Travelers' 1992 10-K").
10.25 The Travelers Corporation 1984 Management
Incentive Plan, as amended effective January
1, 1991, incorporated by reference to
Exhibit 10(c) to the Annual Report on Form
10-K of old Travelers for the fiscal year
ended December 31, 1990 (File No. 1-5799).
10.26 The Travelers Corporation Supplemental
Benefit Plan, effective December 20, 1992,
incorporated by reference to Exhibit 10(d)
to the Annual Report on the old Travelers'
1992 10-K.
34
<PAGE>
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.27 The Travelers Corporation TESIP Restoration
and Non-Qualified Savings Plan, effective
January 1, 1991, incorporated by reference
to Exhibit 10(e) to the old Travelers'
1991 10-K.
10.28 The Travelers Severance Plan of Officers, as
amended September 23, 1993, incorporated by
reference to Exhibit 10.30 to the Company's
1993 Form 10-K.
10.29 The Travelers Corporation Directors'
Deferred Compensation Plan, as amended
November 7, 1986, incorporated by
reference to Exhibit 10(d) to the Annual
Report on Form 10-K of old Travelers for
the fiscal year ended December 31, 1986
(File No. 1-5799).
10.30 Employment Agreement dated as of July 30, Electronic
1994, between SBI and Joseph J. Plumeri II.
11.01 Computation of Earnings Per Share. Electronic
12.01 Computation of Ratio of Earnings to Fixed Electronic
Charges.
27.01 Financial Data Schedule. Electronic
99.01 The first three paragraphs of page 31 Electronic
of the Company's filing on Form 10-K for the
year ended December 31, 1989 (File No.
1-9924) (the "Company's 1989 10-K"), and the
first paragraph of page 30 of the Company's
1990 10-K.
The total amount of securities authorized pursuant to any
instrument defining rights of holders of long-term debt of the
Company does not exceed 10% of the total assets of the Company
and its consolidated subsidiaries. The Company will furnish
copies of any such instrument to the Securities and Exchange
Commission upon request.
35
<PAGE>
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 Inc.
Date: November 14, 1994 By /s/ James Dimon
------------------------------
James Dimon
President and
Chief Financial Officer
(Principal Financial Officer)
Date: November 14, 1994 By /s/ Irwin Ettinger
-------------------------------
Irwin Ettinger
Senior Vice President
(Chief Accounting Officer)
36
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.01 Employment Protection Agreement, dated as of
December 31, 1987, between The Travelers Inc.
(the "Company") (as successor to Commercial
Credit Company ("CCC")), and Sanford I. Weill,
incorporated by reference to Exhibit 10.03 to
CCC's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987 (File No.
1-6594).
10.02.1 Stock Option Plan of the Company, as amended
through April 26, 1989, incorporated by
reference to Annex A to the prospectus
contained in the Company's Registration
Statement on Form S-8 (No. 33-29711).
10.02.2 Amendment to the Company's Stock Option
Plan, dated October 23, 1991, incorporated
by reference to Exhibit 10.02.2 to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991 (File
No. 1-9924) (the "Company's 1991 10-K").
10.02.3 Amendments to the Company's Stock Option
Plan, approved by the Company's stockholders
on April 22, 1992, incorporated by reference
to Exhibit 10.02.3 to the Company's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1992 (File No.1-9924)
(the "Company's 1992 10-K").
10.02.4 Amendment to the Company's Stock Option
Plan, dated July 22, 1992, incorporated by
reference to Exhibit 10.02.4 to the
Company's 1992 10-K.
10.02.5 Amendment No. 11 to the Company's Stock Option Plan,
incorporated by reference to Exhibit 10.02.5
to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 (File No. 1-9924)
(the "Company's 1993 10-K").
10.02.6 Amendment No. 12 to the Company's Stock Option Plan,
incorporated by reference to Exhibit 10.02.6 to the
Company's 1993 10-K.
10.03 Retirement Benefit Equalization Plan of the
Company (as successor to Primerica Holdings,
Inc.), as amended, incorporated by reference to
Exhibit 10.03 to the Company's 1993 10-K.
<PAGE>
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.04 Letter Agreement between Joseph A. Califano,
Jr. and the Company, dated December 14,
1988, incorporated by reference to Exhibit
10.21.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December
31, 1988 (File No. 1-9924) (the "Company's
1988 10-K").
10.05.1 The Company's Deferred Compensation Plan for
Directors, incorporated by reference to
Exhibit 10.21.2 to the Company's 1988 10-K.
10.05.2 Amendment to the Company's Deferred
Compensation Plan for Directors, dated July
22, 1992, incorporated by reference to
Exhibit 10.06.2 of the Company's 1992 10-K.
10.06.1 Supplemental Retirement Plan of the Company,
incorporated by reference to Exhibit 10.23
to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990
(File No. 1-9924) (the "Company's 1990 10-K").
10.06.2 Amendment to the Company's Supplemental Retirement Plan,
incorporated by reference to Exhibit 10.06.2
to the Company's 1993 10-K.
10.07 Long-Term Incentive Plan of the Company, as
amended, incorporated by reference to
Exhibit 10.08 to the Company's 1992 10-K.
10.08.1 Capital Accumulation Plan of the Company
(the "CAP Plan"), as amended to January 31,
1993, incorporated by reference to Exhibit
10.09 to the Company's 1992 10-K.
10.08.2 Amendment No. 8 to the Company's CAP Plan, incorporated
by reference to Exhibit 10.08.2 to the
Company's 1993 10-K.
10.09 Agreement dated December 21, 1993 between
the Company and Edward H. Budd, incorporated
by reference to Exhibit 10.22 to the
Company's 1993 10-K.
<PAGE>
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.10 Restated Stockholder Rights and Support
Agreement dated as of November 1, 1989 by
and among the Company and Arthur L.
Williams, Jr., Angela H. Williams, A.L.
Williams & Associates, Inc. and The A.L.
Williams & Associates, Inc. Pension and
Profit Sharing Plan, incorporated by
reference to Exhibit 10.13 to the Company's
1990 10-K.
10.11 Amended and Restated Exclusive Marketing
Agreement dated as of November 1, 1989 by
and among the Company, A.L. Williams &
Associates, Inc. and Arthur L. Williams,
Jr., incorporated by reference to Exhibit
10.14 to the Company's 1990 10-K.
10.12 Restated Second Amended General Agency
Agreement ("SAGAA") dated as of November 1,
1989 by and among Primerica Life Insurance
Company (formerly Massachusetts Indemnity
Life Insurance Company; hereinafter
"Primerica Life"), A.L. Williams &
Associates, Inc. and Arthur L. Williams,
Jr., incorporated by reference to Exhibit
10.15 to the Company's 1990 10-K.
10.13 Restated First Amendment to SAGAA dated as
of November 1, 1989 by and among Primerica
Life, A.L. Williams & Associates, Inc. and
Arthur L. Williams, Jr., incorporated by
reference to Exhibit 10.16 to the Company's
1990 10-K.
10.14 Restated and Amended Agreement of Charles D.
Adams dated as of November 1, 1989 for the
benefit of each of the Company, A.L.
Williams & Associates, Inc. and The A.L.
Williams Corporation, incorporated by
reference to Exhibit 10.17 to the Company's
1990 10-K.
10.15 Restated and Amended Agreement of Angela H.
Williams dated as of November 1, 1989 for
the benefit of each of the Company, A.L.
Williams & Associates, Inc. and The A.L.
Williams Corporation, incorporated by
reference to Exhibit 10.18 to the Company's
1990 10-K.
<PAGE>
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.16.1 Asset Purchase Agreement dated as of March
12, 1993, by and among Shearson Lehman
Brothers Inc., Smith Barney Inc. ("SBI";
formerly Smith Barney, Harris Upham & Co.
Incorporated), the Company, American
Express Company and Shearson Lehman Brothers
Holdings Inc. (the "SLB Agreement"),
incorporated by reference to Exhibit 10.21
to the Company's 1992 10-K.
10.16.2 Amendment No. 1, dated as of July 31, 1993,
to the SLB Agreement, incorporated by
reference to Exhibit 10.01 to the Company's
Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1993 (File No. 1-
9924) (the "Company's June 30, 1993 10-Q").
10.16.3 Amendment No. 2 dated as of July 31, 1993,
to the SLB Agreement, incorporated by
reference to Exhibit 10.02 to the Company's
June 30, 1993 10-Q.
10.17.1 Employment Agreement dated June 23, 1993, by
and among SBI, the Company and Robert F.
Greenhill (the "RFG Employment Agreement"),
incorporated by reference to Exhibit 10.01
to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September
30, 1993 (File No. 1-9924) (the "Company's
September 30, 1993 10-Q").
10.17.2 Amendment to the RFG Employment Agreement,
incorporated by reference to Exhibit 10.17.2
to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 31,
1994 (File No. 1-9924).
10.18 Memorandum of Sale dated June 23, 1993,
between the Company and Robert F. Greenhill,
incorporated by reference to Exhibit 10.02
to the Company's September 30, 1993 10-Q.
10.19 Registration Rights Agreement dated June 23,
1993, between the Company and Robert F.
Greenhill, incorporated by reference to
Exhibit 10.03 to the Company's September 30,
1993 10-Q.
10.20 Restricted Shares Agreement dated June 23,
1993, by and between the Company and Robert
F. Greenhill, incorporated by reference to
Exhibit 10.04 to the Company's September 30,
1993 10-Q.
<PAGE>
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.21 Agreement and Plan of Merger, dated as of
September 23, 1993, between the Company and
The Travelers Corporation ("old Travelers"),
incorporated by reference to Exhibit 2.1 to
the Current Report on Form 8-K of old
Travelers, dated September 23, 1993 and
filed with the Commission on October 8, 1993
(File No. 1-5799).
10.22 Employment Agreement dated December 31, 1993
between The Travelers Insurance Group Inc.
and Robert W. Crispin, incorporated by reference
to Exhibit 10.24 to the Company's 1993 10-K.
10.23 The Travelers Corporation 1982 Stock Option
Plan, as amended January 10, 1992,
incorporated by reference to Exhibit 10(a)
to the Annual Report on Form 10-K of old
Travelers for the fiscal year ended December
31, 1991 (File No. 1-5799) (the "old
Travelers' 1991 10-K").
10.24 The Travelers Corporation 1988 Stock
Incentive Plan, as amended April 7, 1992,
incorporated by reference to Exhibit 10(b)
to the Annual Report on Form 10-K of old
Travelers for the fiscal year ended December
31, 1992 (File No. 1-5799) (the "old
Travelers' 1992 10-K").
10.25 The Travelers Corporation 1984 Management
Incentive Plan, as amended effective January
1, 1991, incorporated by reference to
Exhibit 10(c) to the Annual Report on Form
10-K of old Travelers for the fiscal year
ended December 31, 1990 (File No. 1-5799).
10.26 The Travelers Corporation Supplemental
Benefit Plan, effective December 20, 1992,
incorporated by reference to Exhibit 10(d)
to the Annual Report on the old Travelers'
1992 10-K.
<PAGE>
Exhibit Filing
Number Description of Exhibit Method
------ ---------------------- ------
10.27 The Travelers Corporation TESIP Restoration
and Non-Qualified Savings Plan, effective
January 1, 1991, incorporated by reference
to Exhibit 10(e) to the old Travelers'
1991 10-K.
10.28 The Travelers Severance Plan of Officers, as
amended September 23, 1993, incorporated by
reference to Exhibit 10.30 to the Company's
1993 Form 10-K.
10.29 The Travelers Corporation Directors'
Deferred Compensation Plan, as amended
November 7, 1986, incorporated by
reference to Exhibit 10(d) to the Annual
Report on Form 10-K of old Travelers for
the fiscal year ended December 31, 1986
(File No. 1-5799).
10.30 Employment Agreement dated as of July 30, Electronic
1994, between SBI and Joseph J. Plumeri II.
11.01 Computation of Earnings Per Share. Electronic
12.01 Computation of Ratio of Earnings to Fixed Electronic
Charges.
27.01 Financial Data Schedule. Electronic
99.01 The first three paragraphs of page 31 Electronic
of the Company's filing on Form 10-K for the
year ended December 31, 1989 (File No.
1-9924) (the "Company's 1989 10-K"), and the
first paragraph of page 30 of the Company's
1990 10-K.
The total amount of securities authorized pursuant to any
instrument defining rights of holders of long-term debt of the
Company does not exceed 10% of the total assets of the Company
and its consolidated subsidiaries. The Company will furnish
copies of any such instrument to the Securities and Exchange
Commission upon request.
Exhibit 10.30
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 30th day of July, 1994, by and among
Smith Barney Inc., a Delaware corporation (the "Company"), and
Joseph J. Plumeri II (the "Executive").
The Board of Directors of the Company desires that the Company
employ the Executive, and the Executive is willing to serve the
Company, on the terms and conditions herein provided.
In order to effect the foregoing, the parties hereto wish to
enter into an employment agreement on the terms and conditions
set forth below. Accordingly, in consideration of the premises
and the respective covenants and agreements of the parties herein
contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Employment. The Company hereby agrees to employ the
----------
Executive, and the Executive hereby agrees to serve the
Company, on the terms and conditions set forth herein.
2. Term. The employment term of this Agreement shall commence
----
on July 30, 1994 (the "Commencement Date") and, subject to
the provisions of Section 10, will end on the third
anniversary of the Commencement Date unless further extended
or sooner terminated as hereinafter provided.
3. Position and Duties. The Executive shall serve as Vice
--------------------
Chairman of The Travelers Inc. (or if there shall be a
corporate reorganization such that The Travelers Inc. is
replaced by a different ultimate parent company, then of
that other company ("Travelers"), the indirect parent of the
Company and shall report only to the Chairman of the Board
of Directors, a Vice Chairman, the Chief Executive Officer
or the Chief Operating Officer of Travelers. The Executive
shall have such responsibilities, duties and authorities
commensurate with his position as may from time to time be
assigned to the Executive by the individual to whom the
Executive shall then report. During the term of this
Agreement, the Executive shall devote substantially all his
time and best efforts during normal business hours to the
business and affairs of Travelers (including the Company and
other Travelers' subsidiaries) except for vacations, illness
or incapacity. Nothing in this Agreement shall preclude the
Executive, subject to compliance with such other policies
and procedures that may be in effect at the Travelers, from
devoting reasonable periods required for (i) serving as a
director or member of a committee of any organization
involving no conflict of interest with the Company, (ii)
delivering lectures and fulfilling speaking engagements, and
(iii) engaging in charitable and community activities
provided that such
<PAGE>
activities do not materially interfere with the performance
of his duties hereunder.
4. Place of Performance. In connection with the Executive's
--------------------
employment by the Company, the Executive shall be based at
the principal executive offices of Travelers in the City of
New York, except for required travel on business.
5. Compensation and Related Matters.
--------------------------------
(a) Compensation. During the period of the Executive's
------------
employment hereunder, the Company shall pay to the
Executive compensation as set forth on Attachment A
hereto. The compensation shall be paid in accordance
with the Company's normal payroll practices, as in
effect from time to time and any bonus for 1997 shall,
subject to the other provisions of this Agreement, be
paid when 1997 bonuses are generally paid by the
Company notwithstanding whether or not Executive is
then employed by the Company.
(b) Expenses. During the period of the Executive's
--------
employment hereunder, the Executive shall be entitled
to receive prompt reimbursement for all reasonable and
customary expenses incurred by the Executive in
performing services hereunder, including all expenses
of travel and living expenses while away from home on
business, provided that such expenses are incurred and
accounted for in accordance with the policies and
procedures established by the Company.
(c) Other Benefits. The Executive shall be entitled to
--------------
participate in all of the employee benefit plans and
arrangements generally available to senior executives
of Travelers (including without limitation each
retirement plan, supplemental and excess retirement
plans, annual and long-term incentive compensation
plans, stock option and purchase plans, group life
insurance (presently group universal life insurance)
and accident plan, medical and dental insurance plans,
financial planning and disability plan). The Executive
shall participate in the Travelers Supplemental
Retirement Plan through maintenance of the existing
frozen benefit and, if and to the extent that it shall
be reopened to participation generally by senior
officers of the Company or of Travelers, accrual of
future benefits, all in accordance with the plan
provisions as in effect from time to time except that
the Executive's service at Shearson will be counted for
the purpose of vesting only. During the period of the
Executive's employment hereunder, the Company will
reimburse the Executive for annual premium to purchase
a term life insurance policy from Primerica Financial
Services ("PFS") carrying a death benefit of up to
$1,500,000.
2
<PAGE>
(d) Capital Accumulation Plan. The Executive shall
--------------------------
participate in the Travelers Capital Accumulation Plan
("CAP"), and any successor or replacement plan
generally applicable to senior executives of the
Company (provided that (i) the "Other Payments" set
forth in Attachments A or B hereof and (ii) any
amounts payable under Section 7 at or following a
termination of employment, shall not be subject to
CAP). The provisions of such plan, as in effect from
time to time, shall govern the participation by the
Executive except as provided in Attachment C hereto.
(e) Vacations. The Executive shall be entitled to no less
---------
than the number of vacation days in each calendar year
determined in accordance with the Company's vacation
policy. The Executive shall also be entitled to all
paid holidays and personal days given by the Company to
its executives.
(f) Services Furnished. The Company shall cause Travelers
------------------
to furnish the Executive with office space, secretarial
assistance and such other facilities and services as
shall be suitable to the Executive's position and
adequate for the performance of his duties as set forth
in Section 3 hereof.
(g) Stock Option. As of the date hereof, the Executive
------------
holds options to purchase 200,000 shares of common
stock of Travelers pursuant to the provisions of the
Travelers Stock Option Plan. In addition to the
existing stock options, the Executive will be
recommended for an additional grant of options to
purchase 100,000 shares of common stock of Travelers
pursuant to the Travelers Stock Option Plan (on a
standard five (5) year vesting schedule) at the
September, 1994 meeting of the Nominations and
Compensation Committee. In the event of (i) the
termination of this Agreement on account of the death
or disability of the Executive or by the Company
without Cause or by the Executive for Good Reason, the
Executive shall be entitled to two (2) years of
additional vesting and exercise of both grants of stock
options, or any longer periods of vesting and exercise
provided for in the Stock Option Plan, or (ii) the
termination of this Agreement by the Executive but
without Good Reason, the Executive shall be entitled to
the remainder (if any) of a two (2) year period running
from the date hereof of additional vesting and exercise
for the original grant of stock options, in both cases
subject to the other provisions of the Stock Option
Plan.
3
<PAGE>
(h) The Executive shall be entitled to have, at the
Company's expense, a car and driver at the level
similar to other senior executives of Travelers.
6. Termination. The Executive's employment hereunder may be
-----------
terminated under the following circumstances:
a) Death. The Executive's employment hereunder shall
-----
terminate upon his death.
b) Disability. If, as a result of the Executive's
----------
incapacity due to physical or mental illness, the
Executive shall have been absent from his duties
hereunder on a full-time basis for the entire period of
six (6) consecutive months, and within thirty (30) days
after written notice of termination is given (which may
occur before or after the end of such six (6) months
period) shall not have returned to the performance of
his duties hereunder on a full-time basis, the Company
may terminate the Executive's employment hereunder.
(c) Cause. The Company may terminate the Executive's
-----
employment hereunder for Cause. For purposes of this
Agreement, the Company shall have "Cause" to terminate
the Executive's employment hereunder upon the
Executive's willful refusal to perform his properly
assigned duties, or if the Executive shall be convicted
of or plead guilty or nolo contendre to conduct
constituting a felony, or in the event of a material
violation of Section 10(a) of this Agreement. Such
termination for reason of the Executive's willful
refusal to perform his duties shall only be effective
upon the Company's written notice of termination to the
Executive and the Executive's failure within ten (10)
days following such notice to cure the breach specified
in such notice.
(d) Any termination of the Executive's employment by the
Company or by the Executive (other than termination
pursuant to subsection (a) hereof) shall be
communicated by written Notice of Termination to the
other party hereto in accordance with Section 12. For
purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for
termination of the Executive's employment under the
provision so indicated.
(e) "Date of Termination" shall mean (i) if the Executive's
employment is terminated by his death, the date of his
death, (ii) if the Executive's employment is terminated
pursuant to subsection (b) above, the later to
4
<PAGE>
expire of thirty (30) days after Notice of Termination
is given pursuant to subsection (b) above or the six
(6) month disability period (provided that the
Executive shall not have returned to the performance of
his duties on a full-time basis prior to expiration of
the thirty (30) day notice period or the six (6) month
disability period, whichever shall expire later) (iii)
if the Executive's employment is terminated pursuant to
subsection (c) above, the date specified in the Notice
of Termination, and (iv) if the Executive's employment
is terminated for any other reason, the date specified
in the Notice of Termination (or, if no date is so
specified, on the date on which a Notice of Termination
is given).
(f) Good Reason. The Executive may terminate his
-----------
employment hereunder for Good Reason. For purposes of
this Agreement, the Executive shall have "Good Reason"
to terminate his employment if the Company shall
materially breach its obligations under this Agreement
as to position, reporting relationship,
responsibilities, duties, authority or place of
performance, as specified in Sections 3 and 4. Such
termination for Good Reason shall only be effective
upon the Executive's written notice of termination to
the Company and the Company's failure within ten (10)
days following such notice to cure the breach specified
in such notice.
(g) The Executive may terminate his employment hereunder
without Good Reason. Such termination shall only be
effective upon receipt of Executive's written notice of
termination to the Company. In such event, the
Company's obligations with regard to compensation shall
be as provided in Section 7(a). Except as otherwise
provided for herein, the provisions of the Stock Option
Plan, the Capital Accumulation Plan and other employee
plans will govern as to participation in such plans.
Such a termination shall not affect the Executive's
other obligations under this Agreement, including
without limitation Section 10.
(h) In the event the Executive shall terminate his
employment with or without Good Reason or if the
Company shall terminate the Executive s employment
other than for Cause, the Company shall furnish to the
Executive appropriate office space, his then
administrative assistant (if employed by the Company or
Travelers or, if not, other appropriate secretarial
assistance) and his existing car and driver until the
earlier of his commencing other employment or six (6)
months after such date of termination.
7. Compensation Upon Termination.
-----------------------------
5
<PAGE>
(a) During any period that the Executive fails to perform
his duties hereunder as a result of incapacity due to
physical or mental illness ("disability period"), the
Executive shall continue to receive his full base
salary at the rate then in effect until his employment
is terminated pursuant to Section 6(b) hereof (provided
that payments so made to the Executive during the
disability period shall be reduced by the sum of the
amounts, if any, payable to the Executive at or prior
to the time of any such payment under disability
benefit plans of the Company and which amounts were not
previously applied to reduce any such payment).
If the Executive's employment is terminated (i) on
account of disability or (ii) by the Executive but not
for Good Reason and with an effective date on or prior
to July 30, 1996, or (iii) by the Company for Cause,
the Company shall pay to the Executive the unpaid
amounts, if any, set forth in Attachment B. In
addition, Executive shall retain his rights, if any,
under any deferred compensation or other benefit plans
in which he participates as specifically provided
herein, or, if not otherwise specifically provided for
in this Agreement, as provided in such plan and the
Company shall have no further obligations to the
Executive under this Agreement.
(b) If the Executive's employment is terminated by his
death, the Company shall pay to the Executive's estate
or as may be directed by the legal representatives of
such estate, the unpaid amounts, if any, set forth in
Attachment B. In addition, the Executive shall retain
his rights, if any, under any deferred compensation or
other benefit plans in which he participates as
specifically provided herein or, if not otherwise
specifically provided for in this Agreement, as
provided in such plan and the Company shall have no
further commitments under this Agreement.
(c) [Intentionally Omitted]
(d) If the Executive's employment is terminated (i) by the
Company other than for Cause (ii) by the Executive for
Good Reason, or (iii) by the Executive but not for Good
Reason and with an effective date after July 30, 1996
then the Company shall pay the Executive his full
compensation (as specified in Attachment A ) through
the full employment term of this Agreement (as
specified in Section 2 and, for these purposes, as if
such earlier termination had not occurred and not
subject to change as specified in Sections 6(a) and (b)
and 7(a) and (b) in the event of the death or
disability of the Executive subsequent to such a
termination), payable when otherwise due under this
Agreement. In addition, the Executive shall retain his
rights, if any, under any deferred compensation or
other benefit plans in which he participates
6
<PAGE>
as specifically provided herein or, if not otherwise
specifically provided for in this Agreement, as
provided in such plan and the Company shall have no
further obligations to the Executive under this
Agreement.
(e) The provisions of this Section 7 (together with (i) the
provisions of any vacation, deferred compensation or
other benefit plans in which he participates and which
are not otherwise specifically provided for in this
Agreement, (ii) the provisions of the CAP and Stock
Option Plans as in effect from time to time and as
specifically provided for in this Agreement in the
event of a termination and (iii) the continuation of
services provision set forth in Section 6(h)) are the
exclusive rights of the Executive regarding a severance
or termination occurring prior to expiration of the
employment term. The rights of the Executive regarding
a severance or termination occurring after expiration
of the employment term shall be governed exclusively by
the Company's regular severance policies as in effect
at such time, except as otherwise specifically provided
for herein.
8. Mitigation. The Executive shall not be required to mitigate
----------
amounts payable pursuant to Section 7 hereof by seeking
other employment or otherwise and any amounts received from
other employment shall not reduce any amounts due under
Section 7.
9. [Intentionally Omitted]
10. Confidentiality and Non-Solicitation.
------------------------------------
(a) Confidentiality. During the employment term of this
---------------
Agreement and thereafter, the Executive will not,
without the written consent of the Company, make use of
or divulge to any person, firm or corporation, any
trade or business secret which may be disclosed to him
by the Company or Travelers or as a result of his
employment with the Company hereunder or his position
with Travelers excepting only such information which
shall be made public without the fault of the Executive
and such information as the Executive shall be
obligated to disclose pursuant to legal process. In
addition, the foregoing provision shall not impair the
ability of the Executive to exercise his good faith
judgment as to disclosures in connection with his
duties hereunder.
(b) Non-Solicitation. In the event the Executive's
----------------
employment hereunder is terminated for any reason the
Executive (i) shall not be personally involved,
directly or indirectly, in hiring any employee of the
Company or Travelers or any of their subsidiaries who
either is a financial
7
<PAGE>
consultant (or similar position) for the Company or
whose annual compensation is in excess of $100,000 or
any independent representative of the Company or
Travelers or any of its subsidiaries who is intended to
act as a full-time representative (e.g., at Primerica
Financial Services, a sales force designation of RVP
or higher ) (any of the foregoing being a "Protected
Person") unless the Company or Travelers shall agree in
writing to such hiring, and (ii) shall not be
personally involved, directly or indirectly, in
soliciting any Protected Person to leave their
employment or terminate their relationship (it being
agreed that simply responding to a request for a
reference will not be deemed direct or indirect
solicitation), in either case until the latest to occur
of the following:
- one year after termination of employment (but not
longer than July 30, 1998).
- the date the last payment of base salary or bonus
actually payable to the Executive is due and
payable under the provisions of Section 7.
- the date the last payment actually payable to the
Executive is due and payable under Attachment B.
- in the event the Executive shall voluntarily
terminate his employment but without Good Reason,
July 30, 1996 (notwithstanding the fact that such
date may be more than one year after such
termination of employment).
(c) The provisions of this Section 10 shall survive the
termination, for any reason, or expiration of this
Agreement.
11. Indemnification. Both during and after the employment term,
---------------
the Company shall indemnify the Executive to the full extent
permitted by law for all expenses, costs, liabilities and
legal fees which the Executive may incur by reason of
entering into this Agreement and in the discharge of all his
duties hereunder, other than for any such expenses, costs,
liabilities or legal fees incurred resulting from the
Executive's bad faith or gross negligence. The provisions
of this Section shall be in addition to, and not in lieu of,
any other rights of indemnification available to the
Executive and shall apply to the Executive when serving in
other capacities at the written request of the Company.
Legal fees covered by this indemnification shall be advanced
as incurred. The provisions of this Section 11 shall
survive the termination, for any reason, or expiration of
this Agreement.
8
<PAGE>
12. Notice. For the purposes of this Agreement, notices,
------
demands and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have
been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered
mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive:
Joseph J. Plumeri II
1461 Martine Avenue
Scotch Plains, New Jersey 07076
With a copy to:
Michael S. Sirkin, Esq.
Proskauer Rose Goetz & Mendelsohn
1585 Broadway
New York, New York 10036
If to the Company:
333 West 34th Street
New York, New York 10001
Attention: General Counsel
with a copy to:
The Travelers Inc.
65 East 55th Street
New York, New York 10022
Attention: General Counsel
or to such other address either party may have furnished to
the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
13. Miscellaneous. No provision of this Agreement may be
-------------
modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and
signed by the Executive and a duly authorized officer of the
Company. No waiver by either party hereto at any time of
any breach of the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any
prior or subsequent time. This Agreement
9
<PAGE>
shall not be assignable by the Executive. This Agreement
shall not be assignable by the Company except in connection
with the sale of all or substantially all of the retail
brokerage business of the Company, in which case it shall be
assumed by Travelers, all references to the Company shall be
deemed thereafter to be references to Travelers and the
obligations of the Company hereunder shall cease; thereafter
it shall not be assignable by Travelers except in connection
with the sale of all or substantially all of the assets of
Travelers. This Agreement shall be binding on the
successors and permitted assigns of the Company. The
validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Delaware without regard to its conflicts of law principles.
In the event the Company breaches this Agreement by non-
payment of any amounts due to the Executive hereunder, the
Executive shall be entitled to recover his costs of
collection. Whenever in this Agreement reference is made to
a pro rata portion of an amount, it shall be calculated by
multiplying an annual amount by a fraction, the numerator of
which is the number of elapsed days in a period (e.g., the
number of days in a calendar year prior to a termination of
employment) and the denominator of which is 365.
14. Validity. The invalidity or unenforceability of any
--------
provision or provisions of this Agreement shall not affect
the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
15. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and
the same instrument.
16. Arbitration. Any controversy or claim arising out of or
-----------
relating to this Agreement, whether arising before or after
the expiration or other termination of this Agreement, shall
be settled by arbitration in New York City in accordance
with the commercial rules of the American Arbitration
Association, except to the extent specifically described in
a document signed by both of the parties hereto and which
specifically refers to this Section. Any decision by the
arbitrators shall be final and binding on the parties and
may be entered into in any court of competent jurisdiction.
17. Entire Agreement. This Agreement sets forth the entire
----------------
agreement of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications,
representations or warranties, whether oral or written,
express or implied, by any officer, employee or
representative of either party hereto, including without
limitation the prior employment agreement between the
parties dated as of July 30, 1993, except to the extent
specifically described in a document signed by both of the
parties hereto and which specifically refers to this
Section.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date and year first above written.
EXECUTIVE
/s/ Joseph J. Plumeri II
_________________________________
Joseph J. Plumeri II
SMITH BARNEY, INC.
/s/ James Dimon
By:_______________________________
Name: James Dimon
Title: Chief Operating Officer
The Travelers Inc. hereby agrees, for the benefit of Joseph J.
Plumeri II, to guarantee the obligations of Smith Barney Inc.
pursuant to that certain Employment Agreement dated as of July
30, 1994. This is a guarantee of payment and not of collection.
The Employment Agreement may be amended by Joseph J. Plumeri II
and Smith Barney Inc., with or without notice to The Travelers
Inc., without affecting this guarantee and this guarantee shall
extend to such Employment Agreement as amended even if it
increases the obligations and liabilities of The Travelers Inc.
THE TRAVELERS INC.
/s/ Charles O. Prince, III
By: ________________________________
Name: Charles O. Prince, III
Title: Senior Vice President
11
<PAGE>
Attachment A
------------
Base Salary
-----------
July 30, 1994 - July 30, 1996 at a rate of $950,000 per year
July 30, 1996 - July 30, 1997 at a rate to be determined within the
discretion of the Company
Bonus
-----
For calendar year 1994 $1,883,333
For calendar year 1995 $2,350,000
For calendar year 1996
for the period January 1 through July 30 $1,370,833
for the period August 1 through An amount to be
December 31 determined within the
discretion of the
Company
For the portion of the Agreement within An amount to be
1997 determined within the
discretion of the
Company
Other Payments
--------------
July 30, 1996 $2,000,000
July 30, 1997 $3,400,000
NOTE:
-----
By way of example, in the event of a termination of employment by
the Executive whether with or without Good Reason or by the
Company but without Cause and, in either case, with an effective
date after July 30, 1996, compensation on termination to be paid
would be as follows:
- base salary - at then current rate through date of termination
- bonus - an amount for any period after July 30, 1996 to be
determined within the discretion of the Company (in addition,
if not already paid, to the amount specified above for the
period January 1, through July 30, 1996) - payable when
bonuses are generally paid for the calendar year in question.
- Other Payment - $3,400,000 payable July 30, 1997
<PAGE>
Attachment B
------------
It is the agreement of the parties hereto that a portion, but not
all, of the compensation payments specified in Attachment A shall
be payable notwithstanding certain types of terminations of this
Agreement. Specifically, in the event of a termination of
employment because of (i) death, (ii) disability (iii)
termination by the Executive but not for Good Reason and with an
effective date on or prior to July 30, 1996 or (iv) by the
Company for Cause, the following amounts of compensation, to the
extent unpaid , shall continue to be paid:
Base Salary
-----------
If termination occurs during the period July 30, 1994 - July 30,
1996 - payment of base salary at a rate of $450,000 per year
through July 30, 1996. If termination occurs after July 30,
1996, at then current base salary through date of termination.
Bonus
-----
If termination occurs during the period July 30, 1994 - July 30,
1996, then payment of the following bonuses for the following
calendar years:
1994 $1,550,000
1995 $1,550,000
1996 $ 904,166
If termination occurs after July 30, 1996, $904,166 for the
period January-July, 1996 and an amount for any remaining period
to be determined within the discretion of the Company
Other Payments
--------------
July 30, 1996 $2,000,000
July 30, 1997 $2,000,000
All such specified payments shall be made as and when otherwise
due under this Agreement except in the case of a termination of
employment because of death, in which case any such payments
shall be calculated as a present value amount using a discount
rate equal to the average of the then published "prime rates" of
the major money center banks headquartered in New York City and
paid in a lump sum.
2
<PAGE>
Attachment C
------------
It is the agreement of the parties hereto that special treatment
shall be accorded the Executive s participation in the CAP Plan
in the event of certain types of termination of this Agreement.
Specifically, in the event of termination by the Executive either
for Good Reason or without Good Reason the following shall apply
to CAP contributions to the extent not yet vested:
1 As to unvested CAP contributions made prior to the date
hereof:
1 without Good Reason (i) prior to July 30, 1995 - the
original cash amount of such contributions shall be
forfeited; or (ii) after July 30, 1995, treated under
the CAP Plan as an involuntary termination without
Cause and all such amounts shall be paid to the
Executive.
2 for Good Reason - treated under the CAP Plan as an
involuntary termination without Cause and all such
amounts shall be paid to the Executive.
2 As to unvested CAP contributions made after the date hereof:
1 relating to the portion of compensation identified in
Attachment B which is subject to CAP
1 for Good Reason or without Good Reason and whether
termination occurs before or after July 30, 1995 -
treated under the CAP Plan as an involuntary
termination without Cause and all such amounts
shall be paid to the Executive
2 relating to the balance of total compensation which is
subject to CAP in excess of that identified in
Attachment B
1 for Good Reason - treated under the CAP Plan as an
involuntary termination without Cause and all such
amounts shall be paid to the Executive
2 without Good Reason - such amounts shall be
forfeited.
Except as specifically provided in this Attachment C, all other
CAP contributions shall be treated in accordance with the
provisions of the CAP Plan, as in effect from time to time.
3
Exhibit 11.01
<TABLE>
<CAPTION>
The Travelers Inc. and Subsidiaries
Computation of Earnings Per Share
(In millions, except for per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings:
Net Income $332 $259 $992 $618
Preferred dividends:
8.125% Cumulative Preferred Stock - Series A (6) (6) (18) (18)
5.5% Convertible Preferred Stock - Series B (2) (1) (5) (1)
$4.53 Convertible Preferred Stock - Series C (4) - (12) -
9 1/4% Preferred Stock - Series D (9) - (27) -
---- ---- ---- ----
Income applicable to common stock $311 $252 $930 $599
=== === === ===
Average shares:
Common 315 235 317 226
Common stock warrants - - - -
Assumed exercise of dilutive stock options 3 5 3 5
Incremental shares - Capital Accumulation Plan 3 4 3 4
---- ---- ---- ----
321 244 323 235
=== === === ===
Earnings Per Share $0.97 $1.03 $2.88 $ 2.54
==== ==== ==== =====
</TABLE>
Earnings per common share is based on the weighted average number of
common shares outstanding during the period after consideration of the
dilutive effect of common stock warrants and stock options and the
incremental shares assumed issued under the Capital Accumulation Plan.
Fully diluted earnings per common share, assuming conversion of all
outstanding dilutive convertible preferred stock, the maximum dilutive
effect of common stock equivalents and the assumed conversion of
convertible debentures (in 1993 only) have not been presented because
the effects are not material. The fully diluted earnings per common
share calculation for the three and nine months ended September 30,
1994 would entail adding the number of shares issuable on conversion of
the Series B preferred stock (3 and 3 million, respectively) and the
incremental dilutive effect of common stock equivalents (1 and 2
million, respectively) to the number of shares included in the earnings
per common share calculation (resulting in 325 and 328 million shares,
respectively) and eliminating the Series B convertible preferred stock
dividend requirements ($2 and $5 million, respectively). The fully
diluted earnings per common share computation for the three and nine
months ended September 30, 1993 would entail adding the incremental
dilutive effect of common stock equivalents (2 and 2 million shares,
respectively) and the number of shares issuable on conversion of other
debentures (0 and 3 million shares, respectively) and the Series B
convertible preferred stock (2 and 1 million shares, respectively) to
the number of shares included in the earnings per common share
calculation (resulting in a total of 248 and 241 million shares,
respectively) and eliminating the after-tax interest expense of other
debentures ($0 and $3 million, respectively) and the dividend
requirements of the Series B convertible preferred stock ($1 and $1
million, respectively).
EXHIBIT 12.01
<TABLE>
<CAPTION>
The Travelers Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(In millions of dollars, except for ratio)
Nine months ended September 30,
----------------------------------
1994 1993
---- ----
<S> <C> <C>
Income before income taxes, minority interest and cumulative
effect of changes in accounting principle $1,530 $ 1,077
Elimination of undistributed equity earnings - (82)
Pre-tax minority interest - (27)
Interest 875 500
Portion of rentals deemed to be interest 99 31
----- -----
Earnings available for fixed charges $2,504 $1,499
===== =====
Fixed charges
-------------
Interest $875 $ 500
Portion of rentals deemed to be interest 99 31
----- -----
Fixed charges $ 974 $ 531
===== =====
Ratio of earnings to fixed charges 2.57x 2.82x
===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 30,
1994 FINANCIAL STATEMENTS OF THE TRAVELERS INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> $ 1,208
<SECURITIES> 73,796 <F1>
<RECEIVABLES> 18,920 <F2>
<ALLOWANCES> 0 <F3>
<INVENTORY> 0 <F3>
<CURRENT-ASSETS> 0 <F3>
<PP&E> 0 <F3>
<DEPRECIATION> 0 <F3>
<TOTAL-ASSETS> 116,380
<CURRENT-LIABILITIES> 0 <F3>
<BONDS> 13,433 <F4>
138
800
<COMMON> 4
<OTHER-SE> 7,879 <F5>
<TOTAL-LIABILITY-AND-EQUITY> 116,380
<SALES> 0 <F3>
<TOTAL-REVENUES> 14,084
<CGS> 0 <F3>
<TOTAL-COSTS> 12,554
<OTHER-EXPENSES> 0 <F3>
<LOSS-PROVISION> 112 <F6>
<INTEREST-EXPENSE> 875 <F6>
<INCOME-PRETAX> 1,530
<INCOME-TAX> 538
<INCOME-CONTINUING> 992
<DISCONTINUED> 0 <F3>
<EXTRAORDINARY> 0 <F3>
<CHANGES> 0 <F3>
<NET-INCOME> 992
<EPS-PRIMARY> 2.88
<EPS-DILUTED> 0 <F3>
<FN>
<F1> Includes the following items from the financial statements: total investments $39,747;
securities borrowed or purchased under agreements to resell $26,656; and trading
securities owned, at market value $7,393.
<F2> Includes the following items from the financial statements: brokerage receivables
$7,752; net consumer finance receivables $6,615 and other receivables $4,553.
<F3> Items which are inapplicable relative to the underlying financial statements are
indicated with a zero as required.
<F4> Includes the following items from the financial statements: investment banking and
brokerage borrowings $3,735; short-term borrowings $2,905 and long-term debt $6,793.
<F5> Includes the following items from the financial statements: additional paid-in capital
$6,655; retained earnings $3,933; treasury stock $(1,359); and unrealized gain (loss) on
investment securities and other, $(1,350).
<F6> Included in total costs and expenses applicable to sales and revenues.
</TABLE>
EXHIBIT NO. 99.01
COMPANY'S FORM 10-K
December 31, 1989
Page 31
Item 3. LEGAL PROCEEDINGS
Other Litigation
Eight purported class actions were filed in late 1987 and
early 1988 (two of which named SBHU as a defendant) in
connection with the June 1986 initial public offering of
Worlds of Wonder ("WOW") common stock, open market trading in
WOW common stock, the public offering in June 1987 of $80
million in WOW convertible debentures, and open market trading
in the debentures. The eight actions have been consolidated
in In re Worlds of Wonder, Inc. Securities Litigation, in the
---------------------------------------------------
United States District Court for the Northern District of
California.
SBHU acted as co-lead underwriter for the initial public
offering and as sole underwriter for the debenture offering.
The Complaint alleges that the prospectuses by which the
initial public offering and the debenture offering were made
and various press releases and public statements were
materially false and misleading. Plaintiffs seek to recover
the amounts paid by all purchasers in the initial public
offering and in the debenture offering, as well as losses
sustained by purchasers of WOW common stock or debentures in
the open market between June 20, 1986 and November 9, 1987.
On June 8, 1988, purchasers of approximately $12 million
of the WOW convertible debentures offered in June 1987 filed
an individual action naming SBHU and others as defendants,
Steinhardt Partners, et al. v. Smith Barney etc., et al., in
----------------------------------------------------------
the United States District Court for the southern District of
New York. These plaintiffs, who are seeking compensatory
damages based on claims similar to those asserted in the
consolidated class actions, have asserted that they will opt
out of any class certified in the other actions and pursue
their claims individually. On February 2, 1989, the Court
granted defendants' joint motion to transfer the Steinhardt
----------
action to the Northern District of California.
<PAGE>
COMPANY'S FORM 10-K
December 31, 1990
Page 30
Item 3. LEGAL PROCEEDINGS
Other Litigation
For information concerning purported class actions and an
individual action against SBHU and others in connection with
Worlds of Wonder common stock and convertible debentures, see
the description that appears in the first, second and third
paragraphs of page 31 of the Company's filing on Form 10-K for
the year ended December 31, 1989, which description is
incorporated by reference herein. A copy of the pertinent
paragraphs of such filing is included as an exhibit to this
Form 10-K. On March 26, 1990, the United States District
Court for the Northern District of California certified a
class of common stock purchasers and a class of debenture
purchasers.
