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Previous: ENHANCED SERVICES CO INC, 10QSB, 1997-10-20 |
Next: GENETIC LABORATORIES WOUND CARE INC, PRE 14A, 1997-10-20 |
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) October 13, 1997
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
quarter ended September 30, 1997 of $740.8 million, up 29% from $576.1 million
in the 1996 period. Operating earnings per share were a record $1.12 versus
$0.86, up 30% on average common shares and share equivalents of 647.0 million
and 639.0 million in the respective quarterly periods. This reflects last year's
two stock splits, as well as the Company's repurchase of approximately 17
million shares over the past twelve months, principally for employee benefit
plans. During 1997, the Company has issued $1.0 billion of preferred stock,
further strengthening its capital base.
Net income was $822.8 million, or $1.24 on a primary per share basis,
which includes investment portfolio gains of $82.0 million, or $0.12 per share.
This compares with net income in the 1996 period of $591.8 million, or $0.88 on
a primary per share basis, which included portfolio losses of $15.0 million, as
well as a $30.7 million after-tax gain related to a contingency payment from the
1995 sale of The MetraHealth Companies. Revenues for the quarter were $6.48
billion, up 15% over $5.62 billion in the 1996 period.
Nine Months Results
- -------------------
For the nine-month period ended September 30, 1997, operating earnings
were a record $2.03 billion, up 25% over $1.62 billion in the 1996 period.
Operating earnings per share of $3.05, on a primary basis, were 26% above $2.43
per share in the 1996 nine-month period.
Net income for the period reached $2.13 billion, or $3.20 on a primary per
share basis, which includes portfolio gains of $96.6 million. This compares with
net income in the 1996 period of $1.69 billion, or $2.53 per share, which
included $33.2 million in portfolio losses, gains of $388.9 million from sales
of stock of subsidiaries and affiliates, non-recurring special charges of $320.6
million related to the acquisition of Aetna's property and casualty insurance
operations in April 1996, as well as the aforementioned MetraHealth gain of
$30.7 million. Revenues were $18.4 billion, up 18% from $15.6 billion.
INVESTMENT SERVICES
- -------------------
SMITH BARNEY OPERATING EARNINGS:
$302.5 MILLION, UP 45% FROM $208.7 MILLION IN 1996 PERIOD
Smith Barney achieved record earnings, reflecting strength in commission
revenues, asset management and investment banking. The firm's 39.3% return on
equity continues to be one of the highest in the securities industry. Pre-tax
profit margins increased to 26.9%, up from 22.7% in the 1996 period.
2
<PAGE>
Total revenues, net of interest expense, reached a record $1.89 billion,
up 26%. Commission revenues also reached a new high at $676.8 million, versus
the prior year's $498.0 million, reflecting strong increases in listed and
over-the-counter securities, as well as mutual fund commissions. Annualized
retail gross production per Financial Consultant rose 28% to a record $428,000,
compared with $334,000 in the prior year period. The firm currently has a sales
force of approximately 10,300 Financial Consultants working from 434 domestic
retail offices.
Asset management and administration fees rose 26% to a record $433.0
million, reflecting growth in all recurring fee-based products, including a 40%
increase in managed accounts, 31% in Consulting Group revenues, and 15% in money
market and mutual fund revenues. Total fee-based assets under management were a
record $188.1 billion, which includes a record $129.7 billion in internally
managed assets, up 28% and 23%, respectively, compared with the 1996 period.
Investment banking revenues reached a record $363.8 million, a 26%
increase, primarily reflecting revenue increases in unit trust, high grade debt
and public finance underwriting.
Principal transaction revenues totaled $252.0 million, a 4% improvement
over the prior year's quarter, with an increase in taxable fixed income trading
partially offset by a decline in municipal trading. Net interest income was a
record $130.5 million, up 23%.
Total expenses, excluding interest, increased 19% to $1.4 billion,
primarily the result of higher production-related compensation expense. The firm
continues to focus on controlling fixed expenses, and maintains one of the
industry's lowest ratios of non-compensation expense to net revenues, which
declined to 18.5% from 21.3% in the 1996 quarter. The firm's ratio of
compensation and benefit expense decreased to 54.6% of revenues from 56.0% in
the prior year period.
CONSUMER FINANCE
- ----------------
CONSUMER FINANCE OPERATING EARNINGS:
$65.4 MILLION, UP 21% FROM $54.1 MILLION IN 1996 PERIOD
The Company's consumer finance business year-over-year increase in
earnings reflects strong receivables growth in all major products, which
resulted from investments made over the last year in marketing, training and
systems enhancements. Net receivables reached a record $10.7 billion versus $7.7
billion a year ago. This increase reflects strong internal growth as well as the
July acquisition of Security Pacific Financial Services which contributed
approximately $1.2 billion in receivables.
3
<PAGE>
Net receivables increased $1.6 billion, or 18%, from the end of the second
quarter, which included the addition of receivables from Security Pacific as
well as internal growth driven primarily by real estate loans generated in
Commercial Credit Company's branch network and through the sales efforts of
Primerica Financial Services ("PFS") representatives. Also, Travelers Bank
credit card outstandings were a record $1.16 billion.
The Security Pacific merger, completed on July 31, did not have a material
impact on earnings during the third quarter, but is expected to be accretive
beginning in the final quarter of 1997. Integration of the new unit has
proceeded rapidly, with the conversion to Commercial Credit's proprietary
systems, and the closing of approximately 100 of Security Pacific's original 297
branch offices. As of September 30, 1997, Commercial Credit's branches totaled
1,057, making it the third largest domestic branch network in the consumer
finance industry.
The average yield, at 14.57%, was lower than the 1996 quarter's yield of
15.17%, mainly because of a shift in the portfolio mix toward lower-risk /
lower-margin real estate loans.
Delinquencies in excess of 60 days were 2.17% as of September 30, 1997,
compared to 2.14% at June 30, 1997, and 2.31% at the end of the prior year
period. The charge-off rate of 2.50% was down from 2.82% for the second quarter
of 1997, and 2.91% for the 1996 third quarter. Loan losses reflect a short-term
benefit related to the Security Pacific acquisition, largely from the transition
of that portfolio to Commercial Credit's charge-off policies. The acquisition
also helped to increase the company's reserves as a percentage of net
receivables to 3.05%, up from 2.91% in the 1997 second quarter and 2.92% in the
1996 third quarter.
LIFE INSURANCE
- --------------
TRAVELERS LIFE AND ANNUITY OPERATING EARNINGS:
$106.5 MILLION, UP 17% FROM $91.4 MILLION IN 1996 PERIOD
Higher earnings at Travelers Life and Annuity were largely driven by
strong investment income as well as by growth in annuity account balances and
long term care insurance. Positive earnings momentum attributable to strong
sales growth of less capital-intensive products -- including variable life
insurance and annuities -- continues to be partially offset by a gradual decline
in the amount of higher margin business written many years ago.
In deferred annuities, significant sales through The Copeland Companies,
Smith Barney Financial Consultants, and a nationwide network of independent
agents, combined with favorable market returns from variable annuities, drove
account balances to $15.6 billion at September 30, 1997, up $3.0 billion from a
year ago. Strong quarterly sales results are reflected in the 20% increase in
net written premiums and deposits, which totaled $574.3 million versus $477.7
million.
4
<PAGE>
Payout and group annuity account balances and benefit reserves reached
$11.7 billion at September 30, 1997, up $424.3 million from a year ago,
primarily as a result of new guaranteed investment contract sales. Net written
premiums and deposits (excluding those of affiliates) were $350.5 million, up
14% from $308.8 million.
For individual life insurance, direct premiums and deposits (excluding
single premium policies) were $71.6 million, marginally ahead of $70.8 million
in the prior year period. Life insurance in force was $50.9 billion at September
30, 1997, up from $50.0 billion a year ago.
Net written premiums for the growing long term care insurance line
increased to $43.7 million, up 27%.
PRIMERICA FINANCIAL SERVICES OPERATING EARNINGS:
$84.7 MILLION, UP 25% FROM $67.7 MILLION IN 1996 PERIOD
The record performance for PFS principally reflects healthy sales of
mutual funds and variable annuities, continued strength in life insurance in
force, as well as favorable mortality experience and disciplined expense
management. The company's total production and cross-selling initiatives
continued to benefit from increased application of the FINANCIAL NEEDS ANALYSIS
- -- a diagnostic tool that increases the company's ability to address PFS client
needs. More than 152,000 FNAs were submitted during the quarter, representing a
330% increase over the prior year period.
Life insurance in force reached a record $368.1 billion, up from $357.2
billion at September 30, 1996, continuing to reflect good policy persistency and
stable sales levels. New term life insurance sales were $13.1 billion, up from
$12.6 billion in the prior year period.
Sales of mutual funds increased to $635.9 million (at net asset value), up
14%. One-third of U.S. mutual fund sales were from Smith Barney products,
predominantly the CONCERT SERIES, which PFS introduced to its market last year.
PFS representatives sold more than $168.6 million (at net asset value) of Smith
Barney mutual funds in the period. In addition, sales of variable annuity
products continued to grow, reaching $100.6 million, up from $24.2 million in
the 1996 third quarter.
Net receivables from second-mortgage ($.M.A.R.T.(SM)) loans and personal
($.A.F.E.(SM)) loans also continued to advance to $2.1 billion, up 48%. Both
products are underwritten by Commercial Credit and distributed exclusively
through the PFS sales force.
5
<PAGE>
The TRAVELERS SECURE(R) property casualty insurance product -- issued
through The Travelers Indemnity Company -- continues to experience healthy
growth in applications and policies. As of September 30, 1997, it had been
rolled out in 37 states, and the number of policies issued during the third
quarter grew to 25,941, compared to 10,516 in the prior year period. TRAVELERS
SECURE(R) is sold through nearly 8,800 PFS agents licensed to sell the product.
PROPERTY AND CASUALTY INSURANCE
- -------------------------------
(Travelers Property Casualty Corp. is 83.4% owned by Travelers Group.)
PROPERTY CASUALTY OPERATING EARNINGS:
$290.0 MILLION FOR QUARTER, BEFORE MINORITY INTEREST
TRAVELERS GROUP'S SHARE:
$242.0 MILLION, UP 20% FROM $201.8 MILLION IN 1996 PERIOD
Quarterly results for Travelers Property Casualty Corp. were strong, with
net investment income and the absence of catastrophe losses as significant
contributors to earnings growth. Operating earnings reflect financing and other
corporate costs of $29.3 million, and were further reduced by minority interest
of $48.0 million.
COMMERCIAL LINES OPERATING EARNINGS (before minority interest):
$223.9 MILLION, UP 10% FROM $203.4 MILLION IN 1996 PERIOD
Performance improvement in this segment reflects strong net investment
income. Retention remained strong, while production levels decreased slightly.
The company continues to maintain its disciplined underwriting policy to
generate profitable business in this highly competitive marketplace while
focusing on the retention of existing business. There were no catastrophe losses
in the period, versus $16.2 million after taxes and reinsurance in the prior
year quarter.
The statutory combined ratio was 109.2%, compared with 109.0% in the 1996
third quarter. Total net written premiums were $1.176 billion, versus $1.217
billion.
PERSONAL LINES OPERATING EARNINGS (before minority interest):
$95.4 MILLION, UP 35% FROM $70.9 MILLION IN 1996 PERIOD
Strong operating earnings reflect the absence of catastrophe losses, and
continued favorable prior year loss reserve development in the automobile line.
In the 1996 period, catastrophe losses, after taxes and reinsurance, were $19.5
million.
6
<PAGE>
Personal lines performance reflects growth in target regions and growth
from new business in affinity marketing, TRAVELERS SECURE(R) products sold
through PFS, and joint marketing programs with other insurers. This was offset
somewhat by higher sales and marketing expense, as well as conservative loss
reserving associated with new books of business. Retention levels remained
strong in both new and existing distribution channels.
The statutory combined ratio was 93.0%, compared to 102.5% in the 1996
third quarter. Total net written premiums were $774.8 million versus $667.7
million.
CORPORATE AND OTHER
- -------------------
OPERATING EXPENSE:
($60.3 MILLION) VERSUS ($47.6 MILLION) IN 1996 PERIOD
Net corporate expenses increased over the prior year period. Corporate
expenses as a percentage of operating earnings were lower than a year ago.
INVESTMENT PORTFOLIO
- --------------------
The Company's $59.7 billion investment portfolio consists primarily of
fixed income investments with average quality ratings of A+/A1. The effective
duration of the fixed income portfolio, including short-term fixed income
investments, is 4.9 years.
--------------------
The Company, which as of September 30, 1997 had assets of approximately
$170 billion, is a diversified, integrated financial services company engaged in
investment services, consumer finance and life and property casualty insurance
services. Book value per share at quarter-end was $22.21 -- which includes
unrealized gains in the investment portfolio of $930 million. Excluding the
mark-to-market requirement for the investment portfolio, the book value for the
period would have been $20.75 per share.
7
<PAGE>
TRAVELERS GROUP - SUMMARY OF EARNINGS
(In millions of dollars and shares, except per share amounts)
<TABLE>
<CAPTION>
For the quarter ended For the nine months ended
September 30, September 30,
----------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 6,475.5 $ 5,622.3 $ 18,376.6 $ 15,563.1
========== ========== ========== ==========
Income after tax and minority interest:
- --------------------------------------
Operating earnings $ 740.8 $ 576.1 $ 2,031.2 $ 1,621.9
---------- ---------- ---------- ----------
Portfolio gains (losses) 82.0 (15.0) 96.6 (33.2)
Gain on sale of subsidiaries and affiliates -- 30.7 -- 419.6
Increase in insurance reserves and other
adjustments resulting from the
acquisition of Aetna P&C -- -- -- (320.6)
---------- ---------- ---------- ----------
Net income 822.8 591.8 2,127.8 1,687.7
---------- ---------- ---------- ----------
Preferred dividends (17.4) (27.2) (58.9) (74.0)
---------- ---------- ---------- ----------
Income applicable to common stock $ 805.4 $ 564.6 $ 2,068.9 $ 1,613.7
========== ========== ========== ==========
Earnings per share:
- ------------------
Operating earnings $ 1.12 $ 0.86 $ 3.05 $ 2.43
Portfolio gains (losses) 0.12 (0.02) 0.15 (0.06)
Gain on sale of subsidiaries and affiliates -- 0.04 -- 0.66
Increase in insurance reserves and other
adjustments resulting from the
acquisition of Aetna P&C -- -- -- (0.50)
---------- ---------- ---------- ----------
Net income $ 1.24 $ 0.88 $ 3.20 $ 2.53
========== ========== ========== ==========
Total average common
and equivalent shares 647.0 639.0 646.6 637.2
========== ========== ========== ==========
Common shares issued and
outstanding at period end 639.9 639.6 639.9 639.6
========== ========== ========== ==========
=====================================================================================================
Proforma earnings per share under FAS 128
to be adopted December 31, 1997:
Operating earnings
Basic $ 1.18 $ 0.90 $ 3.22 $ 2.53
---------- ---------- ---------- ----------
Diluted $ 1.11 $ 0.86 $ 3.04 $ 2.42
---------- ---------- ---------- ----------
Net income
Basic $ 1.31 $ 0.92 $ 3.38 $ 2.64
---------- ---------- ---------- ----------
Diluted $ 1.24 $ 0.88 $ 3.19 $ 2.53
---------- ---------- ---------- ----------
=====================================================================================================
</TABLE>
<PAGE>
TRAVELERS GROUP - SEGMENT REVENUES
(In millions of dollars)
<TABLE>
<CAPTION>
For the quarter ended For the nine months ended
September 30, September 30,
---------------------- --------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
Investment Services
- -------------------
Smith Barney $ 2,388.9 $ 1,888.9 $ 6,593.1 $ 5,816.3
--------- --------- --------- ---------
Consumer Finance Services 448.1 351.1 1,204.8 1,046.8
- -------------------------
--------- --------- --------- ---------
Life Insurance Services
- -----------------------
Travelers Life and Annuity 716.0 573.0 1,999.6 1,698.6
Primerica Financial Services 384.2 349.3 1,134.8 1,058.3
--------- --------- --------- ---------
Total Life Insurance Services 1,100.2 922.3 3,134.4 2,756.9
--------- --------- --------- ---------
Property and Casualty Insurance Services
- ----------------------------------------
Commercial Lines 1,651.1 1,668.9 4,887.5 3,919.4
Personal Lines 852.7 780.5 2,472.6 1,903.4
Other 2.9 2.1 8.8 9.3
--------- --------- --------- ---------
Total P&C Insurance Services 2,506.7 2,451.5 7,368.9 5,832.1
--------- --------- --------- ---------
Corporate and Other 31.6 8.5 75.4 111.0
- ------------------- --------- --------- --------- ---------
Total revenues $ 6,475.5 $ 5,622.3 $18,376.6 $15,563.1
========= ========= ========= =========
</TABLE>
Note: Financial data for Travelers Casualty and Surety Company (formerly The
Aetna Casualty and Surety Company) and The Standard Fire Insurance Company
(collectively, Aetna P&C) is included from the date of acquisition (April 2,
1996).
<PAGE>
TRAVELERS GROUP - SEGMENT OPERATING EARNINGS
(In millions of dollars)
<TABLE>
<CAPTION>
For the quarter ended For the nine months ended
September 30, September 30,
--------------------- -------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING EARNINGS
Investment Services
- -------------------
Smith Barney $ 302.5 $ 208.7 $ 773.8 $ 662.4
-------- -------- -------- --------
Consumer Finance Services 65.4 54.1 166.8 170.1
- ------------------------- -------- -------- -------- --------
Life Insurance Services
- -----------------------
Travelers Life and Annuity 106.5 91.4 312.5 263.7
Primerica Financial Services 84.7 67.7 244.8 199.0
-------- -------- -------- --------
Total Life Insurance Services 191.2 159.1 557.3 462.7
-------- -------- -------- --------
Property and Casualty Insurance Services
- ----------------------------------------
Commercial Lines 223.9 203.4 626.7 454.4
Personal Lines 95.4 70.9 304.2 157.7
-------- -------- -------- --------
319.3 274.3 930.9 612.1
Financing costs and other (29.3) (28.2) (92.6) (58.2)
Minority interest (48.0) (44.3) (146.4) (76.9)
-------- -------- -------- --------
Total P&C Insurance Services 242.0 201.8 691.9 477.0
-------- -------- -------- --------
Total business income 801.1 623.7 2,189.8 1,772.2
-------- -------- -------- --------
Corporate and Other (60.3) (47.6) (158.6) (150.3)
- ------------------- -------- -------- -------- --------
Total operating earnings $ 740.8 $ 576.1 $2,031.2 $1,621.9
======== ======== ======== ========
</TABLE>
Note: Financial data for Travelers Casualty and Surety Company (formerly The
Aetna Casualty and Surety Company) and The Standard Fire Insurance Company
(collectively, Aetna P&C) is included from the date of acquisition (April 2,
1996).
<PAGE>
INVESTMENT SERVICES -- Page 1
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter As of, or for the nine months
ended September 30, ended September 30,
------------------------- -----------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SMITH BARNEY
Revenues:
Commissions $ 676.8 $ 498.0 $ 1,860.0 $ 1,680.0
Asset management and administration fees 433.0 342.3 1,194.6 990.7
Investment banking 363.8 288.5 881.8 864.1
Principal transactions 252.0 243.0 766.0 785.7
Other income 36.5 29.4 103.6 100.2
--------- --------- --------- ---------
Total revenues before interest 1,762.1 1,401.2 4,806.0 4,420.7
--------- --------- --------- ---------
Interest and dividends 626.8 487.7 1,787.1 1,395.6
Interest expense 496.3 381.7 1,422.4 1,094.2
--------- --------- --------- ---------
Net interest revenue 130.5 106.0 364.7 301.4
--------- --------- --------- ---------
Total revenues, net of interest expense 1,892.6 1,507.2 5,170.7 4,722.1
--------- --------- --------- ---------
Expenses:
Compensation and benefits 1,033.4 844.0 2,845.8 2,654.8
Communications 75.0 76.6 220.3 224.9
Occupancy and equipment 66.6 65.5 195.4 195.2
Other expenses 209.3 178.9 608.8 561.1
--------- --------- --------- ---------
Total expenses 1,384.3 1,165.0 3,870.3 3,636.0
--------- --------- --------- ---------
Income before income taxes 508.3 342.2 1,300.4 1,086.1
Provision for income taxes 205.8 133.5 526.6 423.7
--------- --------- --------- ---------
After-tax earnings $ 302.5 $ 208.7 $ 773.8 $ 662.4
========= ========= ========= =========
Total assets (in billions) $ 61.9 $ 46.0 $ 61.9 $ 46.0
Total equity (in billions) $ 3.2 $ 2.6 $ 3.2 $ 2.6
Total regulatory capital (in billions) (1) $ 3.7 $ 3.3 $ 3.7 $ 3.3
Return on equity 39.3% 32.2% 35.0% 34.9%
Pre-tax profit margin 26.9% 22.7% 25.1% 23.0%
Non-compensation expenses as a percent
of net revenue 18.5% 21.3% 19.8% 20.8%
Retail Brokerage
- ----------------
Registered Financial Consultants 10,288 10,430 10,288 10,430
Annualized retail gross production per FC (000) $ 428 $ 334 $ 393 $ 355
Domestic retail offices 434 450 434 450
Asset Management
- ----------------
Assets under fee-based management (in billions):
Money market funds $ 44.9 $ 38.5 $ 44.9 $ 38.5
Mutual funds 39.8 33.8 39.8 33.8
Managed accounts 33.9 25.9 33.9 25.9
Financial consultant managed assets 11.1 7.2 11.1 7.2
--------- --------- --------- ---------
Total internally managed assets 129.7 105.4 129.7 105.4
Consulting Group externally managed assets 58.4 41.3 58.4 41.3
--------- --------- --------- ---------
Total fee-based assets under management $ 188.1 $ 146.7 $ 188.1 $ 146.7
========= ========= ========= =========
Consolidated Travelers Group
Assets Under Management (in billions)
- -------------------------------------
Smith Barney $ 129.7 $ 105.4 $ 129.7 $ 105.4
Travelers Life and Annuity (2) 22.9 21.4 22.9 21.4
--------- --------- --------- ---------
Total assets managed for third parties $ 152.6 $ 126.8 $ 152.6 $ 126.8
========= ========= ========= =========
</TABLE>
(1) Represents total regulatory capital of broker/dealer subsidiary, Smith
Barney Inc.
(2) Part of the Life Insurance Services segment.
<PAGE>
CONSUMER FINANCE SERVICES
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter As of, or for the nine months
ended September 30, ended September 30,
-------------------------- -----------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES $ 448.1 $ 351.1 $ 1,204.8 $ 1,046.8
OPERATING EARNINGS $ 65.4 $ 54.1 $ 166.8 $ 170.1
Net receivables:
Real estate-secured loans (1) $ 4,911.6 $ 3,306.7 $ 4,911.6 $ 3,306.7
Personal loans (2) 3,817.7 3,120.7 3,817.7 3,120.7
Credit cards 1,163.3 832.2 1,163.3 832.2
Sales finance and other 759.8 478.7 759.8 478.7
----------- ----------- ----------- -----------
Consumer finance receivables,
net of unearned finance charges 10,652.4 7,738.3 10,652.4 7,738.3
Accrued interest receivable 74.0 46.6 74.0 46.6
Allowance for credit losses (325.1) (225.7) (325.1) (225.7)
----------- ----------- ----------- -----------
Consumer finance receivables, net $ 10,401.3 $ 7,559.2 $ 10,401.3 $ 7,559.2
=========== =========== =========== ===========
Number of branches 1,057 862 1,057 862
Number of credit card accounts 905,600 765,800 905,600 765,800
Average yield 14.57% 15.17% 14.55% 15.33%
Average net interest margin 8.13% 8.59% 8.08% 8.72%
Charge-off rate 2.50% 2.91% 2.74% 2.90%
60+ days past due as % of receivables 2.17% 2.31% 2.17% 2.31%
Reserves as % of net receivables 3.05% 2.92% 3.05% 2.92%
Finance insurance premiums earned $ 43.9 $ 39.3 $ 129.0 $ 114.6
(1) Includes fully secured $.M.A.R.T. receivables $ 1,689.1 $ 1,029.5 $ 1,689.1 $ 1,029.5
(2) Includes $.A.F.E. and partially secured
$.M.A.R.T. receivables $ 381.8 $ 374.3 $ 381.8 $ 374.3
</TABLE>
<PAGE>
LIFE INSURANCE SERVICES -- Page 1
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter As of, or for the nine months
ended September 30, ended September 30,
------------------------- -----------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES $1,100.2 $ 922.3 $3,134.4 $2,756.9
OPERATING EARNINGS
Travelers Life and Annuity $ 106.5 $ 91.4 $ 312.5 $ 263.7
Primerica Financial Services 84.7 67.7 244.8 199.0
-------- -------- -------- --------
Total $ 191.2 $ 159.1 $ 557.3 $ 462.7
======== ======== ======== ========
</TABLE>
<PAGE>
LIFE INSURANCE SERVICES -- Page 2
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter As of, or for the nine months
ended September 30, ended September 30,
------------------------- -----------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
TRAVELERS LIFE AND ANNUITY
REVENUES $ 716.0 $ 573.0 $ 1,999.6 $ 1,698.6
OPERATING EARNINGS $ 106.5 $ 91.4 $ 312.5 $ 263.7
Deferred annuities:
- -------------------
Number of annuities in force (000):
Fixed 411.8 399.7 411.8 399.7
Variable 326.7 256.0 326.7 256.0
--------- --------- --------- ---------
Total 738.5 655.7 738.5 655.7
========= ========= ========= =========
Number of annuities issued (000):
Fixed 5.2 6.0 23.2 19.2
Variable 24.4 19.5 69.3 59.1
--------- --------- --------- ---------
Total 29.6 25.5 92.5 78.3
========= ========= ========= =========
Net written premiums & deposits:
Fixed $ 142.4 $ 155.2 $ 528.2 $ 474.7
Variable 431.9 322.5 1,247.6 1,000.2
--------- --------- --------- ---------
Total $ 574.3 $ 477.7 $ 1,775.8 $ 1,474.9
========= ========= ========= =========
Policyholder account balances & benefit
reserves (1):
Fixed $ 7,310.8 $ 7,232.2 $ 7,310.8 $ 7,232.2
Variable 8,307.9 5,406.2 8,307.9 5,406.2
--------- --------- --------- ---------
Total $15,618.7 $12,638.4 $15,618.7 $12,638.4
========= ========= ========= =========
Payout annuities:
- -----------------
Net written premiums & deposits $ 49.0 $ 32.3 $ 171.9 $ 99.7
Policyholder account balances & benefit
reserves $ 4,429.7 $ 4,397.4 $ 4,429.7 $ 4,397.4
GIC and other annuities:
- ------------------------
Net written premiums & deposits (2) $ 301.5 $ 276.5 $ 1,457.7 $ 898.0
Policyholder account balances & benefit
reserves (1),(3) $ 7,238.9 $ 6,846.9 $ 7,238.9 $ 6,846.9
Individual life insurance:
- --------------------------
Life insurance in force (in billions, face amt.):
Term $ 29.7 $ 29.4 $ 29.7 $ 29.4
Permanent (universal & whole life) 21.2 20.6 21.2 20.6
--------- --------- --------- ---------
Total $ 50.9 $ 50.0 $ 50.9 $ 50.0
========= ========= ========= =========
Number of life policies in force (000) 530.1 549.8 530.1 549.8
Life insurance issued (in billions, face amt.) $ 1.5 $ 1.7 $ 4.5 $ 4.9
Number of life policies issued (000) 5.2 6.6 16.3 19.6
Direct periodic premiums and deposits $ 71.6 $ 70.8 $ 211.3 $ 210.5
Policyholder account balances & benefit
reserves $ 2,257.3 $ 2,146.7 $ 2,257.3 $ 2,146.7
Long term care:
- ---------------
Number of policies in force (000) 96.2 70.8 96.2 70.8
Net written premiums $ 43.7 $ 34.4 $ 129.5 $ 92.9
Other individual accident and health:
- -------------------------------------
Net written premiums (4) $ 3.8 $ 5.4 $ 11.9 $ 29.3
All businesses:
- ---------------
Net investment income $ 463.2 $ 442.9 $ 1,363.0 $ 1,279.4
Interest credited to contractholders $ 209.6 $ 205.1 $ 611.8 $ 622.3
</TABLE>
(1) Includes general account, separate accounts and managed funds.
(2) Excludes deposits of $182 and $351 in the 1997 third quarter and nine
month period, respectively, and $60 for the 1996 third quarter and nine
month period, related to the transfer-in-house of old Travelers pension
fund assets previously managed externally.
(3) Includes $2,026.5 and $1,763.5 in guaranteed investment contracts at
September 30, 1997 and 1996, respectively.
(4) Includes $9.5 million for the 1996 nine month period in premiums related
to the business transferred to Travelers Property Casualty Corp.
<PAGE>
LIFE INSURANCE SERVICES -- Page 3
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter As of, or for the nine months
ended September 30, ended September 30,
------------------------- -----------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PRIMERICA FINANCIAL SERVICES
REVENUES $ 384.2 $ 349.3 $1,134.8 $1,058.3
OPERATING EARNINGS $ 84.7 $ 67.7 $ 244.8 $ 199.0
Face value (in billions) of:
Life insurance issued $ 13.1 $ 12.6 $ 39.2 $ 38.9
Life insurance in force $ 368.1 $ 357.2 $ 368.1 $ 357.2
Number of life policies issued (000) 56.7 59.0 173.8 186.4
Number of life policies in force (000) 2,149.7 2,137.3 2,149.7 2,137.3
Annualized issued premiums $ 44.5 $ 43.6 $ 133.5 $ 135.4
Direct premiums $ 304.4 $ 298.0 $ 907.9 $ 891.1
Earned premiums:
PFS individual term life $ 242.3 $ 237.6 $ 727.0 $ 715.5
Other 14.9 17.3 48.5 54.2
-------- -------- -------- --------
Total $ 257.2 $ 254.9 $ 775.5 $ 769.7
======== ======== ======== ========
Mutual fund sales at NAV (1) $ 635.9 $ 557.3 $2,027.3 $1,760.9
Net new cash on $.M.A.R.T. and $.A.F.E. loans (2) $ 315.5 $ 193.0 $ 943.1 $ 490.4
</TABLE>
(1) Includes mutual fund sales in Canada of $121.5 million and $90.6 million
during the 1997 and 1996 quarters and $458.5 million and $308.0 million
during the 1997 and 1996 nine months, respectively.
(2) These loans are marketed by PFS; the receivables are reflected in the
assets of Consumer Finance Services.
<PAGE>
PROPERTY & CASUALTY INSURANCE SERVICES -- Page 1
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter As of, or for the nine months
ended September 30, ended September 30,
------------------------- -----------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
TOTAL P&C INSURANCE
REVENUES
Commercial Lines $1,651.1 $1,668.9 $4,887.5 $3,919.4
Personal Lines 852.7 780.5 2,472.6 1,903.4
Other 2.9 2.1 8.8 9.3
-------- -------- -------- --------
Total $2,506.7 $2,451.5 $7,368.9 $5,832.1
======== ======== ======== ========
OPERATING EARNINGS
Commercial Lines $ 223.9 $ 203.4 $ 626.7 $ 454.4
Personal Lines 95.4 70.9 304.2 157.7
-------- -------- -------- --------
319.3 274.3 930.9 612.1
Financing costs and other (29.3) (28.2) (92.6) (58.2)
Minority interest (48.0) (44.3) (146.4) (76.9)
-------- -------- -------- --------
Total $ 242.0 $ 201.8 $ 691.9 $ 477.0
======== ======== ======== ========
GAAP Consolidated Statement of Operations
- -----------------------------------------
Revenues:
Premiums $1,806.0 $1,817.3 $5,417.7 $4,321.8
Net investment income 527.6 493.2 1,532.6 1,162.3
Fee income 90.4 100.6 278.8 294.3
Realized investment gains (losses) 56.7 1.4 58.0 (24.1)
Other revenues 23.1 36.9 73.0 68.5
-------- -------- -------- --------
Total revenues 2,503.8 2,449.4 7,360.1 5,822.8
-------- -------- -------- --------
Claims and expenses:
Claims and claim adjustment expenses* 1,344.8 1,430.6 4,076.3 3,953.8
Policyholder dividends 17.6 10.9 34.3 23.1
Amortization of deferred acquisition costs 286.0 278.5 848.3 648.5
General and administrative expenses 343.3 333.9 1,009.2 963.4
-------- -------- -------- --------
Total expenses 1,991.7 2,053.9 5,968.1 5,588.8
-------- -------- -------- --------
Income before federal income taxes 512.1 395.5 1,392.0 234.0
Federal income taxes 156.0 120.3 423.5 28.4
-------- -------- -------- --------
Net income from property casualty operations 356.1 275.2 968.5 205.6
Financing costs and other (29.3) (28.2) (92.6) (58.5)
-------- -------- -------- --------
Total net income** $ 326.8 $ 247.0 $ 875.9 $ 147.1
======== ======== ======== ========
* Includes pre-tax:
Catastrophe losses, net of reinsurance $ -- $ 54.9 $ 14.8 $ 114.0
** Includes, net of taxes:
Net investment income $ 369.5 $ 343.0 $1,071.0 $ 818.4
Realized investment gains (losses) $ 36.8 $ 0.9 $ 37.6 $ (15.8)
Net charges related to the acquisition and
integration of Aetna P&C $ -- $ -- $ -- $ (391.0)
Statutory combined ratio (1):
- -----------------------------
Loss and loss adjustment expense ratio 71.8% 75.7% 72.7% 89.4%
Other underwriting expense ratio 30.8% 31.0% 29.6% 31.2%
-------- -------- -------- --------
Combined ratio 102.6% 106.7% 102.3% 120.6%
======== ======== ======== ========
Statutory combined ratio, excluding net charges
related to the acquisition and integration of Aetna
P&C (1):
-------
Loss and loss adjustment expense ratio 71.8% 75.7% 72.7% 77.1%
Other underwriting expense ratio 30.8% 31.0% 29.6% 29.9%
-------- -------- -------- --------
Combined ratio 102.6% 106.7% 102.3% 107.0%
======== ======== ======== ========
</TABLE>
(1) Before policyholder dividends, which are immaterial.
Note: Except where otherwise noted, financial data for Travelers Casualty and
Surety Company (formerly The Aetna Casualty and Surety Company) and The Standard
Fire Insurance Company (collectively, Aetna P&C) is included from the date of
acquisition (April 2, 1996).
Certain reclassifications have been made to prior year financial information to
conform to the current year's presentation.
<PAGE>
PROPERTY & CASUALTY INSURANCE SERVICES -- Page 2
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter As of, or for the nine months
ended September 30, ended September 30,
------------------------- -----------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
COMMERCIAL LINES
Net written premiums by market (1):
- -----------------------------------
National accounts $ 151.1 $ 240.6 $ 522.4 $ 527.1
Commercial accounts 502.3 450.6 1,515.8 1,032.7
Select accounts 353.9 345.3 1,087.2 854.8
Specialty accounts 169.1 180.0 530.1 453.3
-------- -------- -------- --------
Total net written premiums $1,176.4 $1,216.5 $3,655.5 $2,867.9
======== ======== ======== ========
Statutory combined ratio (2):
- -----------------------------
Loss and loss adjustment expense ratio 77.3% 76.8% 79.0% 99.2%
Other underwriting expense ratio 31.9% 32.2% 30.3% 32.7%
-------- -------- -------- --------
Combined ratio 109.2% 109.0% 109.3% 131.9%
======== ======== ======== ========
Statutory combined ratio, excluding net charges
related to the acquisition and integration of
Aetna P&C (2):
-------------
Loss and loss adjustment expense ratio 77.3% 76.8% 79.0% 79.4%
Other underwriting expense ratio 31.9% 32.2% 30.3% 30.5%
-------- -------- -------- --------
Combined ratio 109.2% 109.0% 109.3% 109.9%
======== ======== ======== ========
Catastrophe losses, net of reinsurance
(after-tax) $ -- $ 16.2 $ 5.1 $ 22.6
PERSONAL LINES
Net written premiums by product line:
- -------------------------------------
Auto $ 490.9 $ 456.1 $1,446.8 $1,192.7
Homeowners and other 283.9 211.6 847.8 492.0
-------- -------- -------- --------
Total net written premiums $ 774.8 $ 667.7 $2,294.6 $1,684.7
======== ======== ======== ========
Statutory combined ratio:
- -------------------------
Loss and loss adjustment expense ratio 63.9% 73.9% 63.3% 73.3%
Other underwriting expense ratio 29.1% 28.6% 28.6% 28.8%
-------- -------- -------- --------
Combined ratio 93.0% 102.5% 91.9% 102.1%
======== ======== ======== ========
Catastrophe losses, net of reinsurance
(after-tax) $ -- $ 19.5 $ 4.5 $ 51.5
</TABLE>
(1) The 1997 nine month net written premiums include an increase of $142.4
million due to a change to conform Aetna P&C's and Travelers P&C's methods
of recording net written premiums in the 1997 first quarter. The 1996 nine
month net written premiums include an adjustment associated with a
reinsurance transaction, which reduced premiums by $89.0 million.
(2) Before policyholder dividends, which are immaterial.
Note: Financial data for Travelers Casualty and Surety Company (formerly The
Aetna Casualty and Surety Company) and The Standard Fire Insurance Company
(collectively, Aetna P&C) is included from the date of acquisition (April 2,
1996).
Certain reclassifications have been made to prior year financial information to
conform to the current year's presentation.
<PAGE>
SELECTED OTHER DATA
(In millions of dollars)
<TABLE>
<CAPTION>
At September 30, At December 31,
1997 1996
---------------- ---------------
<S> <C> <C>
INVESTMENT PORTFOLIO (at carrying value) (1)
- --------------------------------------------
Fixed-income investments:
Available for sale (at market value):
Mortgage-backed securities - principally obligations
of U.S. Government agencies $ 9,040 $ 8,524
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies 3,571 3,848
Corporates (including redeemable preferreds) 27,029 25,028
Obligations of states and political subdivisions 6,812 5,347
Debt securities issued by foreign governments 1,379 1,198
Held to maturity (at amortized cost) 43 53
------- -------
Total fixed-income investments 47,874 43,998
Equity securities (at market value) 1,609 1,157
Mortgage loans and real estate held for sale 4,153 4,507
Policy loans 1,875 1,910
Short-term and other 4,159 5,173
------- -------
Total invested assets $59,670 $56,745
======= =======
After tax unrealized gains/(losses) on invested assets $ 930 $ 469
======= =======
DETAIL OF MORTGAGE LOANS & REAL ESTATE
- --------------------------------------
Performing mortgages $ 3,588 $ 3,721
Performing real estate (2) 581 728
------- -------
Total $ 4,169 $ 4,449
Yield 10.7% 10.2%
Underperforming mortgages $ 74 $ 91
Underperforming real estate (2) 51 134
------- -------
Total $ 125 $ 225
Yield 5.5% 4.1%
Total (2) $ 4,294 $ 4,674
======= =======
Yield 10.5% 9.5%
======= =======
Proceeds from sales (year to date) $ 699 $ 457
======= =======
</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.
<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: October 20, 1997 By /s/ William T. Bozarth
----------------------------
William T. Bozarth
Vice President
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