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) January 16, 1996
--------------------------------
Travelers Group Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9924 52-1568099
-------- ---------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
388 Greenwich Street, New York, New York 10013
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 816-8000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
Results of Operations
Travelers Group Inc. (the Company) had operating earnings for the fourth
quarter, ended December 31, 1995, of $441.7 million, up 32% from $333.9 million
in the 1994 period. Earnings per share from operations were $1.32 versus $0.99,
up 33% on average common shares of 318.2 million and 317.6 million in the
respective quarterly periods.
For the full year 1995, operating earnings reached a record $1.632 billion, up
24% from $1.321 billion in 1994. On a per share basis, operating earnings were a
record $4.88 on 317.4 million average common shares versus $3.85 in 1994 on
322.0 million shares. The decline in the number of shares during the year
reflects the Company's repurchase of approximately 9.2 million shares in 1995,
principally for employee benefit plans.
Smith Barney achieved record operating earnings of $186.9 million and $599.5
million for the quarter and the year, up 159% and 63%, respectively, over the
prior year periods. On a combined basis, operating earnings of the Travelers
Life & Annuities and Property/ Casualty segments reached a record $182.6 million
and $692.0 million for the quarter and year, which were increases of 21% and
31%, respectively, over the comparable 1994 periods.
Net income for the 1995 fourth quarter was $606.9 million, or $1.84 per share,
which included operating earnings, investment portfolio gains of $68.2 million,
as well as a net gain of $97.0 million resulting principally from the sale of
The MetraHealth Companies, Inc. (MetraHealth) -- a joint venture between The
Travelers Insurance Company and Metropolitan Life Insurance Company (MetLife)
- --to United HealthCare Corporation. According to the terms of the transaction,
Travelers Group could receive up to an additional $169.0 million in proceeds,
based on MetraHealth's 1995 performance.
This compares with net income in the 1994 fourth quarter of $333.9 million, or
$0.99 per share, which reflected, as well as operating earnings, reported
investment portfolio losses of $87.8 million, and an $87.8 million gain from
sales of subsidiaries and affiliates, including American Capital Management &
Research Inc. and Bankers & Shippers Insurance Company (Bankers & Shippers).
Net income for the full year 1995 was $1.834 billion, or $5.51 per share, which
in addition to operating earnings, included investment portfolio gains of $85.3
million and gains on sales of subsidiaries and affiliates of $117.0 million.
This compares with net income in 1994 of $1.326 billion, or $3.86 per share,
which reflected, in addition to operating earnings, gains of $87.8 million from
the sale of subsidiaries and affiliates, as well as reported net investment
portfolio losses of $83.2 million.
The Company's revenues for the fourth quarter were $4.3 billion, relatively even
with $4.4 billion in the 1994 period, and for the year declined to $17.6 billion
2
<PAGE>
versus $18.5 billion in 1994. Revenues from ongoing businesses were actually up
22% for the quarter, after deducting revenues for the 1994 period from
businesses that were sold. On the same basis, full year revenues from ongoing
businesses were up 14%.
INVESTMENT SERVICES
SMITH BARNEY OPERATING EARNINGS:
Quarter: $186.9 MILLION, UP 159% FROM $72.2 MILLION IN 1994 PERIOD
Year: $599.5 MILLION, UP 63% FROM $368.2 MILLION IN 1994 PERIOD
Continued strength in the financial markets contributed to Smith Barney's record
earnings for the quarter and the year. The firm's return on equity reached 30.1%
for the quarter, and 24.7% for the year. Pre-tax profit margins increased to
21.5% in the quarter, and to 18.9% for the year.
Revenues, net of interest expense, reached record levels of $1.48 billion and
$5.43 billion for the quarter and the year, respectively. Commission revenues
were up 31% in the quarter to $532.8 million, primarily as a result of higher
activity in over-the-counter and listed securities markets, as well as increased
mutual fund activity. Commission revenues increased to $2.0 billion for the full
year, up 12% from $1.8 billion in 1994.
Investment banking revenues increased 83% to a record $261.8 million for the
quarter, and were up 24% to a record $846.6 million for the year -- reflecting
strong volume in equity and corporate debt underwriting and a record quarter for
merger and acquisition fees.
Principal trading revenues for the quarter were flat compared with the
comparable 1994 period because of a decline in municipal trading, offset by
strong gains in equities. For the year, however, principal trading revenues
increased 13% to $1.02 billion. Asset management fees rose 29% to a record
$300.6 million during the quarter, bringing total asset management fees for 1995
to $1.1 billion. Assets under management reached a record $96.2 billion at
year-end 1995, up 23% from 1994.
Net interest income of $95.2 million was relatively even with fourth quarter
1994, but increased 15% to $377.1 million for the year 1995.
Total expenses, excluding interest, increased 12% in the quarter as a result
of higher production-related compensation expense. The firm continued to
maintain its focus on controlling fixed expenses after having achieved its
stated goal of $75 million in annualized reductions.
Results for "Mutual Funds and Asset Management" were previously included in this
segment. American Capital Management & Research Inc. was sold in December 1994,
3
<PAGE>
and RCM Capital Management is included in "Corporate and Other" until its sale
is completed.
CONSUMER FINANCE
CONSUMER FINANCE OPERATING EARNINGS:
Quarter: $64.9 MILLION, UP 6% FROM $61.1 MILLION IN 1994 PERIOD
Year: $246.4 MILLION, UP 9% FROM $226.7 MILLION IN 1994 PERIOD
Growth in receivables outstanding for Commercial Credit Company -- up a modest
5% from a year ago because of lower customer demand -- contributed to improved
earnings for the fourth quarter and the year. Loans outstanding at year-end 1995
reached $7.2 billion.
The average yield on the portfolio was slightly higher in the quarter than in
the comparable 1994 period -- 15.78% versus 15.62% -- and net margins declined
to 8.97% from 9.01% in the comparable period, because of higher funding costs.
For the year, the average yield rose to 15.64% compared with 15.41 % in 1994,
and net margins rose to 8.79% from 8.76%, as a result of improved yields, offset
by higher funding costs.
Delinquencies in excess of 60 days rose to 2.14% at December 31, 1995, versus
historically low levels of 1.88% in 1994, and 1.97% at the end of the third
quarter of 1995. Correspondingly, the charge-off rate, which had been at record
low levels in 1994, moved higher in 1995 -- reaching 2.58% in the fourth quarter
versus 2.24% in the 1995 third quarter and 2.08% in the prior year period. For
the year, the charge-off rate was 2.28%, versus 2.08% for 1994. Reserves as a
percentage of net receivables increased in the quarter to 2.66% from 2.64% at
September 30, 1995.
Commercial Credit Company's total number of offices at year end stood at 850,
down from 877 at September 30, 1995. During the quarter, branches were
consolidated in anticipation of a new structure designed to better serve the
company's growing business of underwriting second-mortgage ($.M.A.R.T.) loans
for Primerica Financial Services. The number of credit card accounts issued
through Travelers Bank increased by nearly 133,000 since the beginning of 1995,
to a record level of more than 753,000 accounts.
4
<PAGE>
LIFE INSURANCE
PRIMERICA FINANCIAL SERVICES OPERATING EARNINGS:
Quarter: $60.3 MILLION, UP 14% FROM $52.8 MILLION IN 1994 PERIOD
Year: $231.2 MILLION, UP 14% FROM $203.3 MILLION IN 1994 PERIOD
Primerica Financial Services' earnings gains for the quarter and the year
reflected continued growth in life insurance in force as well as improving life
insurance margins compared to 1994.
New term life sales were $13.5 billion in face amount for the quarter, up from
$12.6 billion in the previous quarter, but down from $15.0 billion in the 1994
fourth quarter. Total life insurance in force at year end reached a record
$348.2 billion, compared with $335.0 billion in 1994, and up from $344.7 billion
at the end of the 1995 third quarter, indicating continued good policy
persistency. The number of policies in force also increased during the year.
Sales of mutual funds for the quarter rose nearly 29% to $360.3 million (at net
asset value) from the prior year period's $279.8 million, indicating strong
customer demand. The company has also been successful in its efforts to increase
the number of independent representatives licensed to sell registered
securities.
Net receivables from second-mortgage ($.M.A.R.T.) loans and personal ($.A.F.E.)
loans also continued to advance to $1.26 billion, up from $1.11 billion at
December 31, 1994 and from $1.23 billion at the end of the 1995 third quarter.
Both loan products are underwritten by Commercial Credit Company and distributed
exclusively through the PFS sales force.
The company's Secure property/casualty insurance product, issued through
Travelers Indemnity and rolled out in 1995 in 14 states, continues to experience
healthy growth in applications.
TRAVELERS LIFE & ANNUITIES OPERATING EARNINGS:
Quarter: $74.1 MILLION, UP 21% FROM $61.4 MILLION IN 1994 PERIOD
Year: $281.2 MILLION, UP 34% FROM $209.2 MILLION IN 1994 PERIOD
Higher investment margins -- helped by reinvestment of proceeds from sales
of underperforming real estate during the year -- and improved productivity
drove the increase in 1995 earnings. Quarterly results for 1995 also include
investment income attributable to the reinvestment of MetraHealth sale proceeds,
but exclude earnings from Transport Life Insurance Company (Transport Life),
which was spun-off to holders of Travelers Group Inc. common stock in September
1995.
5
<PAGE>
For individual annuities, net written premiums and deposits were $532.8 million
for the quarter, up 46% from $364.3 million in the prior year period, and for
the year were $1.7 billion, up 31% from $1.3 billion. Total policyholder account
balances and benefit reserves at year-end 1995 were $ 12.7 billion versus $10.9
billion in 1994.
Sales continue to be strengthened by the success of Vintage, the variable
annuity product distributed exclusively by Smith Barney Financial Consultants,
which was launched in June 1994, and now accounts for more than 40% of all
individual annuity production at Travelers. Vintage Life and Travelers Target
Maturity, the first of several new products planned for Smith Barney, were
introduced in September 1995. Annuity sales were also helped in part by rating
agency upgrades for claims-paying ability that occurred during the year.
In the group annuity business, net written premiums and deposits for the quarter
were $307.0 million versus $124.8 million in last year's quarter, and $1.0
billion versus $771.5 million for the years 1995 and 1994, respectively. These
amounts exclude $200 million in deposits in the 1995 first quarter, and $512
million in the 1994 fourth quarter, related to the transfer in-house of "old"
Travelers pension fund assets previously managed externally. A management
decision not to renew low margin guaranteed investment contracts written in
prior years accounted for a reduction in group annuity policyholder account
balances and benefit reserves to $10.6 billion at year-end, from $12.2 billion
at year-end 1994.
Individual life insurance in force, excluding Transport Life, was $49.2 billion
at year-end 1995, up from $48.4 billion at year-end 1994. Net written premiums
and deposits for individual life insurance, excluding Transport Life, were $88.3
million for the quarter and $269.3 million for the year, compared to last year's
$84.9 million and $282.1 million for the respective periods. The year-over-year
decline reflects the purchase of additional reinsurance coverage in 1995, and
de-emphasis of sales of certain lower-margin life insurance products.
Net written premiums for health-related lines, excluding Transport Life, were
$34.9 million for the quarter, up 23% from $28.3 million in the prior year
period, and for the year were $132.6 million, up 19% from $111.1 million. These
increases reflect strong growth in long-term care insurance.
6
<PAGE>
PROPERTY & CASUALTY INSURANCE
COMMERCIAL LINES OPERATING EARNINGS:
Quarter: $82.3 MILLION, UP 31% FROM $62.9 MILLION IN 1994 PERIOD
Year: $306.6 MILLION, UP 40% FROM $218.5 MILLION IN 1994 PERIOD
Performance improvement in this segment was primarily driven by improved loss
trends in the workers' compensation line, higher net investment income, and
expense reduction initiatives. Total net written premiums and equivalents were
$1.1 billion for the quarter, relatively even with the 1994 period, and were
$5.1 billion for the year, down from $5.4 billion in 1994.
In the national accounts market, premiums and equivalents were $589.4 million in
the quarter, compared with $617.9 million in the prior year period, and were
$2.9 billion in 1995, compared with $3.2 billion in 1994. Customer retention and
new business generation in the quarter remained strong, up significantly from
the comparable 1994 period. However, this activity was more than offset by the
continued decline in the workers' compensation involuntary pool service
business. This decline is related to a de-population of involuntary pools, as
the loss experience of workers' compensation improves and insureds move to
voluntary markets.
Full year production levels also declined, because of selective renewal activity
in a competitive pricing environment and reduced servicing of involuntary pool
workers' compensation business. The company experienced continued success in
lowering clients' workers' compensation losses, which reduced premiums and
equivalents.
Premiums and equivalents in the agency market were $457.3 million in the quarter
and $1.9 billion for the year, compared with $443.7 million and $1.9 billion,
respectively, for the comparable 1994 periods. Continued middle market growth in
industry-specific programs and in loss-responsive products was partly offset by
continued softness in the guaranteed-cost commercial products business.
Catastrophe losses, after taxes and reinsurance, were negligible for the 1995
quarter and $7.0 million for the year, versus $2.4 million and $30.4 million,
respectively, in the comparable 1994 periods.
PERSONAL LINES OPERATING EARNINGS:
Quarter: $26.2 MILLION VERSUS $26.0 MILLION IN 1994 PERIOD
Year: $104.2 MILLION VERSUS $102.3 MILLION IN 1994 PERIOD
Expense reduction initiatives and strong net investment income contributed to
personal lines earnings in 1995, while the prior year benefited from a one-time
contribution of $9.0 million from the favorable resolution of the New Jersey
Market Transition Facility (MTF) deficit, as well as earnings from Bankers &
7
<PAGE>
Shippers (which was sold in October 1994). Excluding the MTF resolution and
Bankers & Shippers earnings, 1995 operating earnings were up 24% over 1994.
Net written premiums in the quarter were $319.6 million compared to $353.6
million a year ago, and for the 1995 year were $1.3 billion, compared with $1.4
billion in 1994. However, when adjusted for the sale of Bankers & Shippers, net
written premiums on continuing lines for the year 1995 were up approximately 8%
over the prior year. Personal Lines is experiencing premium growth with
independent agents in target markets.
Catastrophe losses in 1995 reduced earnings by $12.2 million, compared to $26.4
million a year ago.
CORPORATE AND OTHER
OPERATING EXPENSE:
Quarter: ($53.0 MILLION) VERSUS ($63.1 MILLION) IN 1994 PERIOD
Year: ($137.2 MILLION) VERSUS ($200.0 MILLION) IN 1994 PERIOD
This segment's results include earnings of $6.0 million in the 1995 quarter from
business previously included in Travelers Managed Care and Employee Benefits
(MCEBO) segment. The full year reflects $77.5 million of MCEBO earnings and a
higher level of, and higher interest rates on, corporate borrowings. In 1994,
MCEBO earnings were included in the "Life Insurance" segment.
8
<PAGE>
TRAVELERS GROUP INC. - SUMMARY OF EARNINGS
(In millions of dollars and shares, except per share amounts)
<TABLE>
<CAPTION>
For the quarter ended For the year ended
December 31, December 31,
---------------- -------------- -------------- --------------
1995 1994 1995 1994
---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $4,263.7 $4,380.6 $17,623.6 $18,464.7
============== ============== ============== ==============
After-tax income
Operating earnings $441.7 $333.9 $1,631.9 $1,320.9
-------------- -------------- -------------- --------------
Portfolio gains (losses) 68.2 (87.8) 85.3 (83.2)
Gain on sale of subsidiaries and affiliates 97.0 87.8 117.0 87.8
-------------- -------------- -------------- --------------
Net income 606.9 333.9 1,834.2 1,325.5
-------------- -------------- -------------- --------------
Preferred dividends (21.1) (20.7) (84.0) (82.9)
-------------- -------------- -------------- --------------
Income applicable to common stock $585.8 $313.2 $1,750.2 $1,242.6
============== ============== ============== ==============
Earnings per share:
Before portfolio gains (losses) and gain on
sale of subsidiary $1.32 $0.99 $4.88 $3.85
Portfolio gains (losses) 0.22 (0.28) 0.27 (0.26)
Gain on sale of subsidiaries and affiliates 0.30 0.28 0.36 0.27
-------------- -------------- -------------- --------------
Net Income $1.84 $0.99 $5.51 $3.86
============== ============== ============== ==============
Total average common
and equivalent shares 318.2 317.6 317.4 322.0
============== ============== ============== ==============
Common shares issued and
outstanding at period end 316.2 316.5 * *
============== ============== ============== ==============
</TABLE>
* Same as quarter end
9
<PAGE>
TRAVELERS GROUP INC. - SEGMENT REVENUES
(In millions of dollars)
<TABLE>
<CAPTION>
For the quarter ended For the year ended
December 31, December 31,
-------------- -------------- -------------- --------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES
Investment Services
Smith Barney $1,821.2 $1,425.3 $6,808.3 $5,533.9
Mutual Funds and Asset Management (1) 37.8 155.9
-------------- -------------- -------------- --------------
Total Investment Services 1,821.2 1,463.1 6,808.3 5,689.8
-------------- -------------- -------------- --------------
Consumer Finance Services 348.7 322.5 1,354.3 1,238.6
-------------- -------------- -------------- --------------
Life Insurance Services
Primerica Financial Services 346.4 330.7 1,355.5 1,289.9
Travelers Life and Annuities 630.8 565.0 2,502.4 2,198.5
Managed Care and Employee Benefits (2) 867.2 3,521.5
-------------- -------------- -------------- --------------
Total Life Insurance Services 977.2 1,762.9 3,857.9 7,009.9
-------------- -------------- -------------- --------------
Property and Casualty Insurance Services
Commercial lines 617.8 505.2 3,063.4 3,058.3
Personal lines 384.6 329.7 1,481.9 1,479.4
-------------- -------------- -------------- --------------
Total P&C Insurance Services 1,002.4 834.9 4,545.3 4,537.7
-------------- -------------- -------------- --------------
Corporate and Other (1),(2) 114.2 (2.8) 1,057.8 (11.3)
-------------- -------------- -------------- --------------
Total Revenues $4,263.7 $4,380.6 $17,623.6 $18,464.7
============== ============== ============== ==============
</TABLE>
(1) American Capital was sold during 1994. RCM Capital Management, the
remaining component of what were the Mutual Funds and Asset Management
operations in 1994, is reported as part of Corporate and Other in 1995. In
December 1995, Travelers Group entered into an agreement to sell its
interest in RCM to Dresdner Bank AG. The sale is expected to close in
mid-1996 subject to approval by the Federal Reserve.
(2) Operations comprising Managed Care and Employee Benefits in 1994 were
either sold to Metropolitan Life Insurance Company or exchanged for a 50%
interest in The MetraHealth Companies Inc. The 1995 MetraHealth interest,
together with the revenue from the run-off portion of businesses
transferred to MetraHealth, are included in Corporate and Other. These
operations, which comprise substantially all of the revenues included in
Corporate and Other, are being accounted for as discontinued operations. As
previously announced, subsidiaries of Travelers Group and Metropolitan Life
completed the sale of their interests in MetraHealth to United HealthCare
Corporation on October 2, 1995.
10
<PAGE>
TRAVELERS GROUP INC. - SEGMENT OPERATING EARNINGS
(In millions of dollars)
<TABLE>
<CAPTION>
For the quarter ended For the year ended
December 31, December 31,
-------------- -------------- -------------- --------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING EARNINGS
Investment Services
Smith Barney $186.9 $72.2 $599.5 $368.2
Mutual Funds and Asset Management (1) 7.3 32.5
-------------- -------------- -------------- --------------
Total Investment Services 186.9 79.5 599.5 400.7
-------------- -------------- -------------- --------------
Consumer Finance Services 64.9 61.1 246.4 226.7
-------------- -------------- -------------- --------------
Life Insurance Services
Primerica Financial Services 60.3 52.8 231.2 203.3
Travelers Life and Annuities 74.1 61.4 281.2 209.2
Managed Care and Employee Benefits (2) 53.3 160.2
-------------- -------------- -------------- --------------
Total Life Insurance Services 134.4 167.5 512.4 572.7
-------------- -------------- -------------- --------------
Property and Casualty Insurance Services
Commercial lines 82.3 62.9 306.6 218.5
Personal lines 26.2 26.0 104.2 102.3
-------------- -------------- -------------- --------------
Total P&C Insurance Services 108.5 88.9 410.8 320.8
-------------- -------------- -------------- --------------
Total business income 494.7 397.0 1,769.1 1,520.9
-------------- -------------- -------------- --------------
Corporate and Other (1),(2) (53.0) (63.1) (137.2) (200.0)
-------------- -------------- -------------- --------------
Operating earnings $441.7 $333.9 $1,631.9 $1,320.9
============== ============== ============== ==============
</TABLE>
(1) American Capital was sold during 1994. RCM Capital Management, the
remaining component of what were the Mutual Funds and Asset Management
operations in 1994, is reported as part of Corporate and Other in 1995. In
December 1995, Travelers Group entered into an agreement to sell its
interest in RCM to Dresdner Bank AG. The sale is expected to close in
mid-1996 subject to approval by the Federal Reserve.
(2) Operations comprising Managed Care and Employee Benefits in 1994 were
either sold to Metropolitan Life Insurance Company or exchanged for a 50%
interest in The MetraHealth Companies Inc. The 1995 MetraHealth interest,
together with the earnings from the run-off portion of businesses
transferred to MetraHealth, are included in Corporate and Other. These
operations are being accounted for as discontinued operations. As
previously announced, subsidiaries of Travelers Group and Metropolitan Life
completed the sale of their interests in MetraHealth to United HealthCare
Corporation on October 2, 1995.
11
<PAGE>
INVESTMENT SERVICES -- Page 1
(In millions of dollars)
<TABLE>
<CAPTION>
As of and for the quarter ended As of and for the year ended
December 31, December 31,
-------------- -------------- -------------- --------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SMITH BARNEY INC.
Revenues:
Commissions $532.8 $407.4 $2,008.1 $1,799.7
Investment banking 261.8 143.4 846.6 680.4
Principal trading 253.7 253.5 1,016.0 900.1
Asset management fees 300.6 233.3 1,051.9 940.7
Other income 31.5 22.0 134.1 113.2
-------------- -------------- -------------- --------------
Total revenues before interest 1,380.4 1,059.6 5,056.7 4,434.1
-------------- -------------- -------------- --------------
Interest and dividends 440.8 365.7 1,751.6 1,099.8
Interest expense 345.6 270.0 1,374.5 770.4
-------------- -------------- -------------- --------------
Net interest revenue 95.2 95.7 377.1 329.4
-------------- -------------- -------------- --------------
Total revenues, net of interest expense 1,475.6 1,155.3 5,433.8 4,763.5
-------------- -------------- -------------- --------------
Expenses:
Compensation and benefits 833.2 729.9 3,192.6 2,953.4
Occupancy, communications 135.4 146.0 571.6 574.3
Other expenses 189.8 159.1 641.3 590.6
-------------- -------------- -------------- --------------
Total expenses 1,158.4 1,035.0 4,405.5 4,118.3
-------------- -------------- -------------- --------------
Income before income taxes 317.2 120.3 1,028.3 645.2
Provision for income taxes (130.3) (48.1) (428.8) (277.0)
-------------- -------------- -------------- --------------
Operating earnings 186.9 72.2 599.5 368.2
-------------- -------------- -------------- --------------
Gain from sale of interest in H.G. Asia 21.3 21.3
-------------- -------------- -------------- --------------
After-tax earnings $186.9 $93.5 $599.5 $389.5
============== ============== ============== ==============
Total assets (in billions) $41.0 $45.6 * *
Total equity (in billions) $2.5 $2.3 * *
Total regulatory capital (in billions) (1) $3.3 $3.1 * *
Return on equity 30.1% 16.2% 24.7% 17.4%
Pre-tax profit margin 21.5% 10.4% 18.9% 13.5%
</TABLE>
(1) Represents total regulatory capital of broker/dealer subsidiary, Smith
Barney Inc.
* Same as quarter end.
12
<PAGE>
INVESTMENT SERVICES -- Page 2
(In millions of dollars)
<TABLE>
<CAPTION>
As of and for the quarter ended As of and for the year ended
December 31, December 31,
-------------- -------------- -------------- --------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SMITH BARNEY INC.
Retail Brokerage
Number of registered Financial Consultants 10,682 11,173 * *
Annualized retail gross production per FC (000) $323 $255 $305 $277
Domestic retail offices 461 474 * *
Priced assets in client accounts (in billions) $419.7 $338.4 * *
Asset Management
Assets under fee-based management ($ in bil):
Money market funds $35.6 $28.9 * *
Mutual funds 31.5 26.0 * *
Managed accounts 23.4 19.2 * *
Assets managed by Financial Consultants (1) 5.7 3.9 * *
-------------- -------------- -------------- --------------
Total $96.2 $78.0 * *
Externally managed assets (wrap accts.) $35.3 $26.7 * *
Investment Banking
Domestic underwriting (full credit to lead mgr.):
Equity -- Volume $1,860.4 $529.9 $5,521.8 $3,467.9
-- Market share 7.0% 3.9% 6.7% 5.6%
Debt -- Volume $6,450.6 $2,448.3 $20,195.5 $10,611.8
-- Market share 3.4% 2.3% 2.9% 1.6%
Municipals -- Volume $4,982.1 $2,858.7 $15,491.3 $13,635.9
-- Market share 8.7% 6.8% 7.9% 6.6%
Capital Markets/Research
Number of institutional specialists 423 381 * *
Number of stocks in which markets are made 1,671 1,721 * *
Number of research analysts 148 160 * *
% of S&P sectors covered by research 96% 96% * *
CONSOLIDATED TRAVELERS GROUP
ASSETS UNDER MANAGEMENT ($ bil.)
Smith Barney $96.2 $78.0 * *
RCM Capital Management 26.2 22.5 * *
Travelers Life and Annuities 22.1 19.2 * *
-------------- -------------- -------------- --------------
Total assets managed for third parties $144.5 $119.7 * *
</TABLE>
(1) Included in assets under fee-based management given
that the contractual relationships with Smith Barney
conform with Institutional Investor standards.
* Same as quarter end.
13
<PAGE>
CONSUMER FINANCE SERVICES
(In millions of dollars)
<TABLE>
<CAPTION>
As of and for the quarter ended As of and for the year ended
December 31, December 31,
-------------- -------------- -------------- --------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES $348.7 $322.5 $1,354.3 $1,238.6
OPERATING EARNINGS $64.9 $61.1 $246.4 $226.7
Net receivables
Personal loans $3,051.0 $2,874.7 * *
Real estate-secured loans 2,957.1 2,844.7 * *
Credit cards 761.8 712.5 * *
Sales finance and other 468.2 453.5 * *
-------------- -------------- -------------- --------------
Consumer finance receivables,
net of unearned finance charges 7,238.1 6,885.4 * *
Accrued interest receivable 46.9 42.3 * *
Allowance for credit losses (192.5) (181.9) * *
-------------- -------------- -------------- --------------
Consumer finance receivables, net $7,092.5 $6,745.8 * *
============== ============== ============== ==============
Number of offices 850 828 * *
Number of credit card accounts 753,200 620,500 * *
Average yield 15.78% 15.62% 15.64% 15.41%
Average net interest margin 8.97% 9.01% 8.79% 8.76%
Charge-off rate 2.58% 2.08% 2.28% 2.08%
60+ days past due as % of receivables 2.14% 1.88% * *
Reserves as % of net receivables 2.66% 2.64% * *
Finance insurance premiums earned $37.4 $31.3 $138.8 $114.5
</TABLE>
* Same as quarter end.
14
<PAGE>
LIFE INSURANCE SERVICES -- Page 1
(In millions of dollars)
<TABLE>
<CAPTION>
As of and for the quarter ended As of and for the year ended
December 31, December 31,
-------------- -------------- -------------- --------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES $977.2 $1,762.9 $3,857.9 $7,009.9
OPERATING EARNINGS
Primerica Financial Services $60.3 $52.8 $231.2 $203.3
Travelers Life and Annuities 74.1 61.4 281.2 209.2
Managed Care and Employee Benefits (1) 53.3 160.2
-------------- -------------- -------------- --------------
Total $134.4 $167.5 $512.4 $572.7
Statutory Data
Travelers Insurance Company :
Statutory capital and surplus (2) $3,051.7 $2,155.8 * *
Adjusted capital & surplus to liabilities (2) 15.0% 10.8% * *
</TABLE>
(1) Operations comprising Managed Care and Employee Benefits in 1994 were
either sold to Metropolitan Life Insurance Company or exchanged for a 50%
interest in The MetraHealth Companies Inc. The 1995 MetraHealth interest,
together with the earnings from the run-off portion of businesses
transferred to MetraHealth, are included in Corporate and Other. These
operations are being accounted for as discontinued operations. As
previously announced, subsidiaries of Travelers Group and Metropolitan Life
completed the sale of their interests in MetraHealth to United HealthCare
Corporation on October 2, 1995.
(2) Current period data is preliminary.
* Same as quarter end.
15
<PAGE>
LIFE INSURANCE SERVICES -- Page 2
(In millions of dollars)
<TABLE>
<CAPTION>
As of and for the quarter ended As of and for the year ended
December 31, December 31,
-------------- -------------- ---------------- --------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
PRIMERICA FINANCIAL SERVICES
REVENUES $346.4 $330.7 $1,355.5 $1,289.9
OPERATING EARNINGS $60.3 $52.8 $231.2 $203.3
Life insurance issued ($ bil., face amount) $13.5 $15.0 $53.0 $57.4
Life insurance in force ($ bil., face amount) $348.2 $335.0 * *
Number of life policies issued (000) 67.8 77.8 266.6 299.4
Number of life policies in force (000) 2,115.6 2,075.6 * *
Annualized issued premiums $56.4 $61.9 $219.8 $224.1
Direct premiums $294.3 $282.4 $1,161.2 $1,097.2
Earned premiums - PFS Individual term life $233.1 $225.7 $931.3 $869.3
Other 22.8 26.4 80.4 93.1
-------------- -------------- -------------- --------------
Total $255.9 $252.1 $1,011.7 $962.4
============== ============== ============== ==============
Mutual fund sales at NAV $360.3 $279.8 $1,298.3 $1,322.2
$.M.A.R.T. LOANs outstanding (1) $1,068.9 $952.3 * *
S.A.F.E. LOANs outstanding (1) $189.4 $154.6 * *
</TABLE>
(1) These loans are marketed by PFS; the receivables are reflected in the
assets of Consumer Finance Services.
* Same as quarter end.
16
<PAGE>
LIFE INSURANCE SERVICES -- Page 3
(In millions of dollars)
<TABLE>
<CAPTION>
As of and for the quarter ended As of and for the year ended
December 31, December 31,
-------------- -------------- ---------------- --------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
TRAVELERS LIFE AND ANNUITIES
REVENUES $630.8 $565.0 $2,502.4 $2,198.5
OPERATING EARNINGS $74.1 $61.4 $281.2 $209.2
Individual life insurance:
Life insurance in force ($ bil., face amt.) (1) $49.2 $49.0 * *
Number of life policies in force (000) (1) 563 606.1 * *
Net written premiums and deposits $88.3 $86.1 $273.4 $286.8
Life insurance issued ($ bil., face amt.) $1.7 $2.0 $6.2 $9.2
Number of life policies issued (000) 6.5 8.4 25.7 38.1
Policyholder account balances & benefit
reserves $2,080.3 $2,075.6 * *
Individual Annuities:
Number of annuities in force (000) 656.5 605.5 * *
Number of annuities issued (000) 27.2 22.0 91.2 88.3
Net written premiums & deposits $532.8 $364.3 $1,712.6 $1,308.7
Policyholder account balances & benefit
reserves (2) $12,729.1 $10,871.0 * *
Group Annuities (3):
Net written premiums & deposits $307.0 $636.8 $1,220.9 $1,283.5
Policyholder account balances & benefit
reserves (2),(4) $10,639.8 $12,209.0 * *
Individual accident & health:
Number of policies in force (000) (1) 77.2 494.4 * *
Net written premiums $34.9 $81.2 $288.4 $334.4
All Businesses:
Net investment income $417.0 $394.3 $1,673.3 $1,470.0
Interest credited to contractholders $234.6 $210.8 $966.8 $870.7
</TABLE>
(1) On September 29, 1995, Travelers Group made a pro rata distribution to its
stockholders of Transport Holdings Inc. which, at the time of distribution,
was the indirect owner of the business of Transport Life Insurance Company.
Comparable in force amounts for 1994 (excluding Transport) are as follows:
face amount of life insurance, $48.4; number of individual life policies,
583.1; and number of individual accident and health policies, 63.4.
(2) Includes general account, separate accounts and managed funds.
(3) Includes deposits of $200 and $512 for the quarters ended
March 31, 1995 and December 31, 1994, respectively, related to the transfer
in-house of old Travelers pension fund assets previously managed
externally.
(4) Includes $1,947.3 and $3,028.1 in guaranteed investment contracts at
December 31, 1995 and 1994, respectively.
* Same as quarter end.
17
<PAGE>
PROPERTY & CASUALTY INSURANCE SERVICES -- Page 1
(In millions of dollars)
<TABLE>
<CAPTION>
As of and for the quarter ended As of and for the year ended
December 31, December 31,
-------------- -------------- -------------- --------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
TOTAL P&C INSURANCE
REVENUES $1,002.4 $834.9 $4,545.3 $4,537.7
OPERATING EARNINGS
Commercial Lines $82.3 $62.9 $306.6 $218.5
Personal Lines 26.2 26.0 104.2 102.3
-------------- -------------- -------------- --------------
Total $108.5 $88.9 $410.8 $320.8
-------------- -------------- -------------- --------------
STATUTORY TO GAAP RECONCILIATION
Net written premiums $885.9 $921.4 $3,606.3 $3,846.5
-------------- -------------- -------------- --------------
Net earned premiums $704.2 $617.1 $3,304.0 $3,517.5
Losses and loss adjustment expenses 487.5 734.5 2,585.2 3,119.0
Other underwriting expenses 248.6 235.0 951.7 1,018.8
Dividends to policyholders (1) 10.3 (51.0) 25.6 (36.5)
-------------- -------------- -------------- --------------
Total deductions 746.4 918.5 3,562.5 4,101.3
-------------- -------------- -------------- --------------
Statutory underwriting loss (42.2) (301.4) (258.5) (583.8)
GAAP adjustments (61.3) 146.6 (301.1) 16.6
-------------- -------------- -------------- --------------
Adjusted underwriting loss (103.5) (154.8) (559.6) (567.2)
Net investment income 193.4 169.7 744.4 644.1
Other income 50.9 103.5 345.1 340.6
-------------- -------------- -------------- --------------
Operating income before federal
income taxes 140.8 118.4 529.9 417.5
Federal income taxes 32.3 29.5 119.1 96.7
-------------- -------------- -------------- --------------
Operating income $108.5 $88.9 $410.8 $320.8
Net investment income - after tax $142.5 $125.7 $551.6 $481.9
Effective tax rate on net investment income 26.3% 25.9% 25.9% 25.2%
Combined ratio (2):
Losses and loss adjustment expenses 69.2% 119.0% 78.2% 88.7%
Other underwriting expenses 28.1% 25.5% 26.4% 26.5%
-------------- -------------- -------------- --------------
Combined 97.3% 144.5% 104.6% 115.2%
Travelers Indemnity
Statutory capital and surplus (3),(4) $2,637.5 $2,061.9 * *
Premiums to surplus ratio (3),(4) 1.37:1 1.74:1 * *
Total loss and loss adjustment expense
reserve $10,096.6 $9,938.0 * *
</TABLE>
(1) Includes a fourth quarter 1994 reclassification of policyholder dividend
reserves to retrospective premium reserves.
(2) The 1994 fourth quarter and full year combined ratios include reserve
increases for environmental claims, litigation and a reduction of ceded
reinsurance balances amounting to $225 million that were charged against
income on a statutory basis (but not for GAAP reporting purposes due to
purchase accounting adjustments related to the acquisition of old
Travelers). The combined ratio is before policyholder dividends, which are
immaterial.
(3) Includes Travelers Indemnity Company, its subsidiaries
and affiliated companies.
(4) Current period data is preliminary.
* Same as quarter end.
18
<PAGE>
PROPERTY & CASUALTY INSURANCE SERVICES -- Page 2
(In millions of dollars)
<TABLE>
<CAPTION>
As of and for the quarter ended As of and for the year ended
December 31, December 31,
---------------- -------------- ---------------- --------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL LINES
REVENUES $617.8 $505.2 $3,063.4 $3,058.3
OPERATING EARNINGS $82.3 $62.9 $306.6 $218.5
Net written premiums & equivalents by market: (1)
National accounts
Premiums $125.9 $110.6 $459.8 $575.9
Equivalents (2) 463.5 507.3 2,404.5 2,651.1
-------------- -------------- -------------- --------------
Total 589.4 617.9 2,864.3 3,227.0
Agency
Premiums 362.8 362.1 1,515.2 1,516.9
Equivalents 94.5 81.6 416.1 339.2
-------------- -------------- -------------- --------------
Total 457.3 443.7 1,931.3 1,856.1
Specialty - Premiums 77.6 73.4 333.7 298.8
-------------- -------------- -------------- --------------
Total premiums and equivalents $1,124.3 $1,135.0 $5,129.3 $5,381.9
-------------- -------------- -------------- --------------
Net written premiums by product line:
Workers compensation $172.9 $187.6 $742.8 $907.1
Multi-peril 85.8 74.0 318.2 303.8
Automobile 101.6 97.3 416.5 417.2
Other liability 130.5 97.5 484.0 426.2
Property and other 75.5 89.7 347.2 337.3
-------------- -------------- -------------- --------------
Total 566.3 546.1 2,308.7 2,391.6
Equivalents (1),(2) 558.0 588.9 2,820.6 2,990.3
-------------- -------------- -------------- --------------
Total premiums and equivalents $1,124.3 $1,135.0 $5,129.3 $5,381.9
Combined ratio (3):
Losses and loss adjustment expenses 64.2% 183.4% 80.6% 100.0%
Other underwriting expenses 26.0% 24.0% 24.4% 24.7%
-------------- -------------- -------------- --------------
Combined 90.2% 207.4% 105.0% 124.7%
Statutory Ratio Development:
Net earned premiums $376.8 $279.2 $2,020.3 $2,143.2
Losses and loss adjustment expenses $241.8 $512.1 $1,628.4 $2,143.2
Other underwriting expenses 147 131.1 563.7 590.9
-------------- -------------- -------------- --------------
Total deductions $388.8 $643.2 $2,192.1 $2,734.1
-------------- -------------- -------------- --------------
Statutory underwriting gain/(loss) (3) ($12.0) ($364.0) ($171.8) ($590.9)
Catastrophe losses (after-tax) (4) $0.0 $2.4 $7.0 $30.4
Net investment income (pre-tax) $151.1 $135.7 $582.1 $513.9
</TABLE>
(1) Equivalents represent estimates of premiums that customers would have been
charged under a fully insured arrangement and do not equal actual revenues.
(2) Amounts for the 1994 quarter and year restated to include $125.6 and
$648.4, respectively, of residual market equivalents.
(3) The 1994 fourth quarter and full year combined ratios include reserve
increases for environmental claims, litigation and a reduction of ceded
reinsurance balances amounting to $225 million that were charged against
income on a statutory basis (but not for GAAP reporting purposes due to
purchase accounting adjustments related to the acquisition of old
Travelers). The combined ratio is before policyholder dividends, which are
immaterial.
(4) Net of reinsurance. Effective April 1, 1995, the threshold of losses
incurred to qualify a specific event as a catastrophe loss was increased.
19
<PAGE>
PROPERTY & CASUALTY INSURANCE SERVICES -- Page 3
(In millions of dollars)
<TABLE>
<CAPTION>
As of and for the quarter ended As of and for the year ended
December 31, December 31,
-------------- -------------- ---------------- --------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
PERSONAL LINES
REVENUES $384.6 $329.7 $1,481.9 $1,479.4
OPERATING EARNINGS $26.2 $26.0 $104.2 $102.3
Net written premiums by product line:
Personal auto (1) $244.7 $260.8 $1,007.8 $1,186.5
Homeowners and other 74.9 92.8 289.8 246.7
-------------- -------------- -------------- --------------
Total written premiums $319.6 $353.6 $1,297.6 $1,433.2
Number of policies (millions) 1.8 1.8 * *
Combined ratio:
Losses and loss adjustment expenses 75.0% 65.8% 74.5% 71.0%
Other underwriting expenses 31.8% 27.7% 29.9% 29.4%
-------------- -------------- -------------- --------------
Combined 106.8% 93.5% 104.4% 100.4%
Statutory Ratio Development:
Net earned premiums $327.4 $337.9 $1,283.7 $1,374.3
Losses and loss adjustment expenses 245.7 222.4 956.8 975.8
Other underwriting expenses 101.6 103.9 388.0 427.9
-------------- -------------- -------------- --------------
Total deductions 347.3 326.3 1,344.8 1,403.7
-------------- -------------- -------------- --------------
Statutory underwriting gain/(loss) ($19.9) $11.6 ($61.1) ($29.4)
Catastrophe losses (after-tax) (2) $3.9 $3.5 $12.2 $26.4
Net investment income (pre-tax) $42.3 $34.0 $162.3 $130.2
</TABLE>
(1) Premiums written by Bankers & Shippers, which was sold in October 1994,
amounted to approximately $48 and $243 in the 1994 quarter and year,
respectively.
(2) Net of reinsurance. Effective April 1, 1995, the threshold of losses
incurred to qualify a specific event as a catastrophe loss was increased.
* Same as quarter end.
20
<PAGE>
SELECTED INVESTMENT DATA
(In millions of dollars)
<TABLE>
<CAPTION>
At December 31, At December 31,
1995 1994
-------------- --------------
<S> <C> <C>
INVESTMENT PORTFOLIO (at carrying value) (1)
Fixed-income investments Available for sale, at market:
Mortgage-backed securities - principally obligations
of U.S. Government agencies $6,085 $4,829
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies 2,848 4,230
Corporates (including redeemable preferreds) 17,166 13,873
Obligations of states and political subdivisions 4,092 3,729
Debt securities issued by foreign governments 453 531
Held to maturity, at amortized cost 68 96
-------------- --------------
Total fixed income 30,712 27,288
Equity securities, at market 856 510
Mortgage loans and real estate held for sale 4,369 5,834
Policy loans 1,888 1,581
Short-term and other 3,140 3,752
-------------- --------------
Total invested assets $40,965 $38,965
============== ==============
After tax unrealized gains/(losses) on invested assets $756 ($1,319)
============== ==============
DETAIL OF MORTGAGE LOANS & REAL ESTATE
Performing mortgages $3,796 $4,906
Performing real estate (2) 194 136
-------------- --------------
Total $3,990 $5,042
Yield 8.6% 8.9%
Underperforming mortgages $252 $510
Underperforming real estate (2) 308 468
-------------- --------------
Total 560 978
Yield 1.0% 1.9%
Total (2) $4,550 $6,020
============== ==============
Yield 7.5% 7.8%
============== ==============
Proceeds from sales during year $995 $1,466
============== ==============
</TABLE>
(1) Represents Travelers Group's consolidated investments, which primarily
support the company's insurance operations but also include corporate
investments and investments managed on behalf of Consumer Finance Services.
(2) Includes real estate joint ventures.
21
<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.
TRAVELERS GROUP INC.
Dated: January 23, 1996 By: /s/ William T. Bozarth
----------------------
Vice President and Controller
