SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 25, 1995
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Travelers Group Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-9924 52-1568099
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
388 Greenwich Street, New York New York 10013
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(Address of principal executive offices) (Zip Code)
(212) 816-8000
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(Registrant's telephone number, including area code)
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TRAVELERS GROUP INC.
Current Report on Form 8-K
Item 5. Other Events.
On June 25, 1995, The Travelers Insurance Group Inc.
("TIGI") and The Travelers Insurance Company ("TIC"), both wholly owned
subsidiaries of Travelers Group Inc. ("Travelers"), entered into a definitive
agreement with MetLife HealthCare Holdings, Inc. ("MHH"), a subsidiary of
Metropolitan Life Insurance Company ("MetLife"), The MetraHealth Companies, Inc.
("MetraHealth") and United HealthCare Corporation ("United") and its acquisition
subsidiary for the acquisition by merger of MetraHealth by United. The
Travelers entities and MHH each own 48.25% of MetraHealth.
The terms of the transaction call for United to pay initial
consideration to the stockholders of MetraHealth of $1.65 billion, of which
$1.15 billion is to be paid in cash and $500 million is to be paid in the form
of convertible preferred stock of United. In addition, United will pay up to
$350 million to the MetraHealth stockholders, based on the operating results of
MetraHealth for 1995. In the event that Company Earnings (as that term is
defined in the merger agreement) of MetraHealth for 1995 are at least $190
million, the stockholders of MetraHealth will be entitled to receive the full
contingency payment. If Company Earnings for 1995 are less than $190 million,
the contingency payment will be reduced ratably, and no payment will be due if
such earnings are $155 million or less. The merger agreement provides that
United will also pay two additional payments to the stockholders of MetraHealth
of up to $175 million each based on the earnings of the combined MetraHealth and
United for 1996 and 1997. In a related agreement, the Travelers entities have
agreed to sell their right to the 1996 and 1997 additional payments to the
MetLife entities for $35 million.
According to the terms of the merger agreement, the
Travelers entities have elected to receive all cash for their portion of the
initial consideration, and accordingly will receive a total of $831 million as a
result of the merger and the related sale to the MetLife entities of the
Travelers entities' share of the 1996 and 1997 additional payments. In
addition, the Travelers entities will receive up to $169 million if a
contingency payment for 1995 is made. Of these amounts, TIC will be entitled to
receive approximately $708 million of the initial consideration and $144 million
of the contingent consideration, with the balance to be received by TIGI.
The Boards of Directors of the Travelers entities and of
MetLife and United have approved the merger. The merger is subject to customary
regulatory approvals, including approvals from a number of state insurance
commissions.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit No. Description
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99.01 Unaudited Pro Forma Consolidated Financial
Information.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: June 29, 1995 TRAVELERS GROUP INC.
By: /s/ Irwin R. Ettinger
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Irwin R. Ettinger
Senior Vice President
Exhibit 99.01
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Sale of Group Life, transfer of Medical Business to MetraHealth and subsequent
sale of investment in MetraHealth
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In December 1994 Travelers Group Inc. (the Company) sold its group
dental insurance business to Metropolitan Life Insurance Company (MetLife), for
$52 million, and on January 3, 1995, completed the sale of its group life
business and remaining non-medical group insurance business to MetLife for $350
million. The assets transferred included customer lists, books and records, and
furniture and equipment. In connection with the sale, The Travelers Insurance
Company (TIC) ceded 100% of its risks in the group life and related businesses
to MetLife on an indemnity reinsurance basis, effective January 1, 1995. In
connection with the reinsurance transaction, TIC transferred assets with a fair
market value of approximately $1.5 billion to MetLife, equal to the statutory
reserves and other liabilities transferred.
On January 3, 1995, TIC and MetLife and certain of their affiliates
formed the MetraHealth joint venture by contributing their medical businesses to
MetraHealth, in exchange for shares of common stock of MetraHealth. The total
contribution made by TIC and its affiliates amounted to approximately $483
million at carrying value on the date of contribution. No gain was recognized
upon the formation of the joint venture. Upon formation of the joint venture
TIC and its affiliates owned 50% of the outstanding capital stock of
MetraHealth, and the other 50% was owned by MetLife and its affiliates. In
March 1995, MetraHealth acquired HealthSpring, Inc., for common stock of
MetraHealth. The acquisition resulted in a reduction in the participation of the
Company and MetLife in the MetraHealth venture to 48.25% each.
In connection with the formation of the joint venture, the transfer of
the fee-based medical business (Administrative Services Only) and other
noninsurance business to MetraHealth was completed on January 3, 1995. As the
medical insurance business of TIC and its affiliates comes due for renewal, and
after obtaining regulatory approvals, the risks will be transferred to
MetraHealth. In the interim, the related operating results for this medical
insurance business (run off) are being reported in the Company's consolidated
financial statements.
On June 25, 1995 the Company agreed to United Health Care
Corporation's (United) proposed acquisition of MetraHealth, which is 48.25%
owned by the Company. The terms of the transaction call for United to pay a
total consideration to MetraHealth's owners of $1.65 billion, $1.15 billion in
cash and $0.5 billion in convertible preferred stock. In addition, United will
pay up to $350 million to these owners if certain 1995 operating results are
achieved and other contingency payments. According to the terms, the Company
will receive a total of $831 million in cash, and up to an additional $169
million if a contingency payment for 1995 (the only year in which the Company
will participate in such payments) is made.
Transport Life Spinoff
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In June 1995, the Company announced that it plans to make
a pro rata distribution to the Company's stockholders of shares of Class A
Common Stock, $.01 par value per share, of Transport Holdings Inc., (Holdings)
currently a wholly owned subsidiary of the Company and which, at the time of the
distribution, will be the indirect owner of the business of Transport Life
Insurance Company. The distribution is subject to the satisfaction of various
conditions.
Assumptions
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The following unaudited pro forma condensed consolidated statements of
income of the Company for the three months ended March 31, 1995, and year ended
December 31, 1994, present consolidated operating results for the Company as if
the above transactions had occurred at the beginning of each period presented.
The accompanying unaudited pro forma condensed consolidated statement of
financial position as of March 31, 1995, gives effect to the above transactions
as if they occurred as of March 31, 1995. The unaudited pro forma consolidated
financial data do not purport to represent what the Company's financial position
or results of operations actually would have been had the transactions in fact
occurred on the dates indicated, or to project the Company's financial position
or results of operations for any future date or period. The pro forma
adjustments are based upon available information and certain assumptions that
the Company currently believes are reasonable in the circumstances. The
<PAGE>
unaudited pro forma consolidated financial information should be read in
conjunction with the accompanying notes thereto; the separate historical
financial statements of the Company as of and for the three months ended March
31, 1995, and for the year ended December 31, 1994, which are contained in the
Company's Form 10-Q for the quarterly period ended March 31, 1995, and in its
Annual Report on Form 10-K for the fiscal year ended December 31, 1994,
respectively.
The pro forma adjustments and pro forma amounts are provided for
informational purposes only, and if each transaction is consummated, the
Company's financial statements will reflect the effects of each transaction only
from the date such transaction occurs. Although the final amounts will differ,
the pro forma condensed financial information reflects management's best
estimate based on currently available information.
<PAGE>
Travelers Group Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Financial Position
As of March 31, 1995
(In millions of dollars)
<TABLE><CAPTION>
Pro
forma
Travelers Less: before Less:
Group Inc. Medical Pro forma Transport Transport Pro
historical Business adjustments Life Spinoff Business forma
---------- -------- ----------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 1,249 $ $ 831 (B) $ 2,080 $ $ 2,080
Investments:
Fixed maturities:
Available for sale at market value 25,618 (499)(A) 25,119 (572)(C) 24,547
Held to maturity at amortized cost 87 87 87
Equity securities, at market value 605 605 (8)(C) 597
Mortgage loans 5,213 (5)(A) 5,208 (11)(C) 5,197
Real estate held for sale 318 318 318
Policy loans 1,596 1,596 (19)(C) 1,577
Short-term and other 4,769 (601)(A) 4,168 (21)(C) 4,147
---------- -------- ----------- ------------ --------- ---------
Total investments 38,206 (1,105) 0 37,101 (631) 36,470
---------- -------- ----------- ------------ --------- ---------
Securities borrowed or purchased under agreements to
resell 22,533 22,533 22,533
Brokerage receivables 6,709 6,709 6,709
Trading securities owned, at market value 8,099 8,099 8,099
Net consumer finance receivables 6,824 6,824 6,824
Reinsurance recoverable 6,698 (6)(A) 6,692 (25)(C) 6,667
Value of insurance in force and deferred policy
acquisition costs 2,194 (2)(A) 2,192 (106)(C) 2,086
Cost of acquired businesses in excess of net assets 1,966 1,966 1,966
Separate and variable accounts 5,573 5,573 5,573
Other receivables 4,438 4,438 (7)(C) 4,431
Other assets 7,704 (485)(A) 7,219 (16)(C) 7,203
Investment in MetraHealth 491 (491)(A) 0 0
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Total assets $112,684 $(2,089) $ 831 $111,426 $ (785) $110,641
---------- -------- --------- ------------ -------- --------
Liabilities
Investment banking and brokerage borrowings $ 2,194 $ $ $ 2,194 $ $ 2,194
Short-term borrowings 2,137 2,137 (40)(C) 2,097
Long-term debt 7,475 7,475 7,475
Securities loaned or sold under agreements to repurchase 22,056 22,056 22,056
Brokerage payables 3,055 3,055 3,055
Trading securities sold not yet purchased, at market value 7,198 7,198 7,198
Contractholder funds 15,532 (419)(A) 15,113 15,113
Insurance policy and claims reserves 27,764 (447)(A) 27,317 (510)(C) 26,807
Separate and variable accounts 5,544 5,544 5,544
Accounts payable and other liabilities 9,926 (740)(A) 109 (B) 9,295 (72)(C) 9,223
---------- -------- --------- ------------ --------- --------
Total liabilities 102,881 (1,606) 109 101,384 (622) 100,762
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ESOP preferred stock - series C 235 235 235
Guaranteed ESOP obligation (82) (82) (82)
---------- -------- ----------- ------------ --------- --------
153 0 0 153 0 153
---------- -------- ----------- ------------ --------- --------
Stockholders' equity
Preferred stock 800 800 800
Common stock 4 4 4
Additional paid-in capital 6,690 6,690 6,690
Retained earnings 4,453 (490)(A) 722 (B) 4,685 (177)(C) 4,508
Treasury stock, at cost (1,481) (1,481) (1,481)
Unrealized gain (loss) on investment securities and
other ,net (816) 7 (A) (809) 14 (C) (795)
---------- -------- ---------- ------------ --------- ---------
Total stockholders' equity 9,650 (483) 722 9,889 (163) 9,726
---------- -------- ---------- ------------ --------- ---------
Total liabilities and stockholders' equity $112,684 $ (2,089) $ 831 $111,426 $(785) $110,641
---------- -------- ---------- ------------ --------- ---------
</TABLE>
See Accompanying Notes
<PAGE>
Travelers Group Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Financial Position
(In millions of dollars)
Adjustments relating to the Medical Business and subsequent sale of investment
in MetraHealth.
(A) Medical Business column - reflects the elimination of the assets,
liabilities and equity related to the run off business of the group
medical businesses and the elimination of the equity investment in
MetraHealth included in the Company's consolidated statements at
March 31, 1995.
(B) Pro forma adjustments column - gives effect to the sale of the equity
investment in MetraHealth and related estimated after-tax proceeds.
Adjustments relating to the Transport Life spinoff:
(C) Transport Business column - reflects the elimination of the assets,
liabilities and equity of the Transport Life Business included in
the Company's consolidated statements at March 31, 1995, which will
be included in the pro rata distribution to the Company's stockholders.
<PAGE>
Travelers Group Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Income
For Year Ended December 31, 1994
(In millions of dollars, except for per share amounts)
<TABLE><CAPTION>
Less:
Travelers Group Life Less:
Group Inc. and Medical Transport
historical Business Business Pro forma
---------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Revenues
Insurance premiums $ 7,590 $ (2,428)(1) $ (228)(3) $ 4,934
Commissions and fees 2,691 2,691
Net investment income 3,637 (153)(1) (46)(3) 3,438
Finance related interest and
other charges 1,030 1,030
Principal transactions 900 900
Asset management fees 795 795
Other income 1,822 (799)(1) (1)(3) 1,022
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Total revenues 18,465 (3,380) (275) 14,810
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Expenses
Policyholder benefits and claims 7,797 (2,492)(1) (138)(3) 5,167
Non-insurance compensation and
benefits 3,241 3,241
Insurance underwriting, acquisition
and operating 2,572 (638)(1) (97)(3) 1,837
Interest 1,284 1,284
Provision for credit losses 152 152
Other operating 1,524 1,524
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Total expenses 16,570 (3,130) (235) 13,205
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Gain on sale of subsidiaries and
affiliates 254 (28)(1) 226
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Income (loss) before income taxes 2,149 (278) (40) 1,831
Provision for income taxes 823 (107)(1) (13)(3) 703
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Net income $ 1,326 $ (171) $ (27) $ 1,128
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Income per share of common stock
and common stock equivalents
Net income per share $ 3.86 $ 3.25
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Weighted average common shares
outstanding and common stock
equivalents (in millions) 322.0 322.0
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</TABLE>
See Accompanying Notes
<PAGE>
Travelers Group Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Income
For the Three Months Ended March 31, 1995
(In millions of dollars, except for per share amounts)
<TABLE><CAPTION>
Travelers Less: Less:
Group Inc. Medical Transport
historical Business Business Pro forma
---------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Revenues
Insurance premiums $ 1,597 $ (308)(2) $ (56)(3) $ 1,233
Commissions and fees 610 610
Net investment income 1,058 (15)(2) (12)(3) 1,031
Finance related interest and
other charges 271 271
Principal transactions 282 282
Asset management fees 182 182
Other income 299 (16)(2) 283
------ ------ ----- -------
Total revenues 4,299 (339) (68) 3,892
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Expenses
Policyholder benefits and claims 1,612 (278)(2) (38)(3) 1,296
Non-insurance compensation and
benefits 806 806
Insurance underwriting, acquisition
and operating 522 (20)(3) 502
Interest 455 455
Provision for credit losses 40 40
Other operating 372 (39)(2) 333
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Total expenses 3,807 (317) (58) 3,432
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Gain on sale of subsidiaries 31 (31)(2) 0
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Income (loss) before income taxes 523 (53) (10) 460
Provision for income taxes 183 (18)(2) (3)(3) 162
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Net income $ 340 $ (35) $ (7) $ 298
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Income per share of common stock
and common stock equivalents
Net income per share $ 1.01 $ 0.88
------ -------
Weighted average common shares
outstanding and common stock
equivalents (in millions) 315.5 315.5
------ -------
</TABLE>
See Accompanying Notes
<PAGE>
Travelers Group Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income
(In millions of dollars)
Adjustments relating to the sale of Group Life, transfer of Medical Business to
MetraHealth and subsequent sale of investment in MetraHealth.
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Year ended December 31, 1994
(1) Group Life and Medical Business column - reflects the elimination of the
operating results of the group life and related businesses sold to
MetLife, the group medical businesses (Medical) which were exchanged
for a 50% equity interest in The MetraHealth Companies, Inc.
(MetraHealth), and the $28 pre-tax gain on the sale of the group dental
business included in the Company's consolidated statements.
Three months ended March 31, 1995
(2) Medical Business column - reflects the elimination of the operating
results for the run off of the medical insurance business (i.e., risks
not yet transferred), the equity earnings in MetraHealth, and the $31
pre-tax gain on the sale of the group life business included in the
Company's consolidated statements.
In accordance with practice in filings with the SEC, no effect has been given to
the use of proceeds from the sale of the Company's interest in MetraHealth,
which are estimated to be $831 million pre-tax, excluding contingent
consideration.
Adjustments relating to the Transport Life spinoff:
(3) Transport Business column - reflects the elimination of the operating
results of the Transport Life Business included in the Company's
consolidated statements for the year ended December 31, 1994, and for
the three months ended March 31, 1995.
